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Measuring the Localization of Economic Activity: A Random Utility Approach

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  • Paulo Guimarães

    ()
    (Universidade do Minho and CEMPRE)

  • Octávio Figueiredo

    ()
    (CEMPRE, Faculdade de Economia da Universidade do Porto)

  • Douglas Woodward

    (University of South Carolina)

Abstract

The 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 Info

Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 161.

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Length: 36 pages.
Date of creation: Oct 2004
Date of revision:
Handle: RePEc:por:fepwps:161

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  1. Louviere,Jordan J. & Hensher,David A. & Swait,Joffre D., 2000. "Stated Choice Methods," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521788304.
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Cited by:
  1. Valter Di Giacinto & Marcello Pagnini, 2008. "Agglomeration within and between regions: Two econometric based indicators," Temi di discussione (Economic working papers), Bank of Italy, Economic Research and International Relations Area 674, Bank of Italy, Economic Research and International Relations Area.

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