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Concentration, agglomeration and the size of plants

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  • Lafourcade, Miren
  • Mion, Giordano

Abstract

This paper investigates whether the geographic distribution of manufacturing activities depends on the size of plants. Using Italian data, we find, as in Kim [Kim, S., 1995. Expansion of markets and the geographic concentration of economic activities: the trends in U.S. regional manufacturing structure, 1860–1987, Quarterly Journal of Economics 110 (4), 881–908.], Holmes and Stevens [Holmes, T.J., and Stevens, J.J., 2002. Geographic concentration and establishment scale, Review of Economics and Statistics 84, 682–690.], and Holmes and Stevens [Holmes, T.J. and Stevens, J.J., 2004. Spatial distribution of economic activities in North America, in: J.V. Henderson and J.F. Thisse, eds., Handbook of Regional and Urban Economics, Vol.4, (Elsevier-North Holland, Amsterdam).], that large plants are more concentrated than small plants. However, considering distance-based patterns via spatial auto-correlation, we find that small establishments actually exhibit a greater tendency to be located in adjacent areas. These apparently contradictory findings raise a measurement issue regarding co-location externalities and suggest that large plants are more likely to cluster within narrow geographical units (concentration), while small establishments would rather co-locate within wider distance-based clusters (agglomeration). This picture is consistent with different size plants engaging in different transport-intensive activities.

Suggested Citation

  • Lafourcade, Miren & Mion, Giordano, 2007. "Concentration, agglomeration and the size of plants," LSE Research Online Documents on Economics 42666, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:42666
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    More about this item

    Keywords

    Concentration; spatial auto-correlation; heterogeneous firms;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • 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
    • R34 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Input Demand Analysis

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