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Geographic Concentration and the Temporal Scope of Agglomeration Economics: An Index Decomposition

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  • Colin Wren

Abstract

The paper decomposes a geographical concentration index to examine the temporal scope of a spillover, which is the period of time over which one firm's activity directly affects the location of other firms' activities. Natural advantages are fixed over reasonably long time periods, but if spillovers have a limited temporal scope then this can be used to identify these agglomeration economies. To operationalize the index decomposition the paper proposes an empirical methodology that is based on frequency estimator approach, which is applied across time periods. The approach is tested by numerical simulation and by application to a dataset on the location of new economic activity across British regions in the form of investment by foreign-owned plants. Overall, the results support the approach and indicate that the temporal scope of a spillover is on average about five years.

Suggested Citation

  • Colin Wren, 2011. "Geographic Concentration and the Temporal Scope of Agglomeration Economics: An Index Decomposition," SERC Discussion Papers 0094, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:sercdp:0094
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    More about this item

    Keywords

    Industrial location; agglomeration forces; geographic concentration index; spillovers; temporal scope;
    All these keywords.

    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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