Measuring the Localization of Economic Activity: A Random Utility Approach
AbstractThe recent index proposed by Ellison & Glaeser (1997) is now well established as the preferred method for measuring the localization of economic activity. We build on McFadden's Random Utility (Profit) Maximization framework, to develop a parametric version of this measure that is more consistent with the theory originally proposed by Ellison and Glaeser (EG). Given that our method is regression based, it goes beyond the descriptive nature of the EG index, allowing us to evaluate how the localization measure behaves with changes in the determinants that drive firms' location decisions.
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Bibliographic InfoPaper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 161.
Length: 36 pages.
Date of creation: Oct 2004
Date of revision:
Find related papers by JEL classification:
- C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
- R39 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other
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