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Measuring industry co-location across county borders

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  • Zheng Tian
  • Paul D. Gottlieb
  • Stephan J. Goetz

Abstract

The location quotient (LQ) measures regional industry concentration with the advantages of easy calculation and interpretation. However, it is a weak method for identifying industry clusters that consist of related industries geographically concentrated in contiguous counties. This paper proposes a new spatial input–output location quotient (SI-LQ) accounting for both the co-location of related industries and the spatial spillover of concentration into neighbouring counties. A bootstrap method is used to determine the cut-off values of the new measure. The practical advantages of the SI-LQ over the traditional LQ include attenuation of the extreme values of the LQ in less populous and remote counties and the identification of large substantive clusters. The SI-LQ outperforms the LQ in a regression analysis of the effect of industry concentration on total employment growth.

Suggested Citation

  • Zheng Tian & Paul D. Gottlieb & Stephan J. Goetz, 2020. "Measuring industry co-location across county borders," Spatial Economic Analysis, Taylor & Francis Journals, vol. 15(1), pages 92-113, January.
    • Handle: RePEc:taf:specan:v:15:y:2020:i:1:p:92-113
    DOI: 10.1080/17421772.2020.1673898
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    Cited by:

    1. Andrew Crawley & Todd M. Gabe & Mariya Pominova, 2021. "The Pitfalls of Using Location Quotients to Identify Clusters and Represent Industry Specialization in Small Regions," International Finance Discussion Papers 1329, Board of Governors of the Federal Reserve System (U.S.).
    2. Manuel Rico & Santiago Cantarero & Francisco Puig, 2021. "Regional Disparities and Spatial Dependence of Bankruptcy in Spain," Mathematics, MDPI, vol. 9(9), pages 1-20, April.

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