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Testing for Localization Using Micro-Geographic Data

  • Gilles Duranton
  • Henry G. Overman

To study the detailed location patterns of industries, and particularly the tendency for industries to cluster relative to overall manufacturing, we develop distance-based tests of localization. In contrast to previous studies, our approach allows us to assess the statistical significance of departures from randomness. In addition, we treat space as continuous instead of using an arbitrary collection of geographical units. This avoids problems relating to scale and borders. We apply these tests to an exhaustive U.K. data-set. For four-digit industries, we find that (i) 52% of them are localized at a 5% confidence level, (ii) localization mostly takes place at small scales below 50 km, (iii) the degree of localization is very skewed, and (iv) industries follow broad sectoral patterns with respect to localization. Depending on the industry, smaller establishments can be the main drivers of both localization and dispersion. Three-digit sectors show similar patterns of localization at small scales as well as a tendency to localize at medium scales. Copyright 2005, Wiley-Blackwell.

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File URL: http://hdl.handle.net/10.1111/0034-6527.00362
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Article provided by Oxford University Press in its journal The Review of Economic Studies.

Volume (Year): 72 (2005)
Issue (Month): 4 ()
Pages: 1077-1106

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Handle: RePEc:oup:restud:v:72:y:2005:i:4:p:1077-1106
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  1. Michael Devereux & Rachel Griffith & Helen Simpson, 1999. "The geographic distribution of production activity in the UK," IFS Working Papers W99/26, Institute for Fiscal Studies.
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  9. Maurel, Francoise & Sedillot, Beatrice, 1999. "A measure of the geographic concentration in french manufacturing industries," Regional Science and Urban Economics, Elsevier, vol. 29(5), pages 575-604, September.
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