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Geographic concentration and the temporal scope of agglomeration economics: an index decomposition

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  • Wren, Colin

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

  • Wren, Colin, 2011. "Geographic concentration and the temporal scope of agglomeration economics: an index decomposition," LSE Research Online Documents on Economics 58351, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:58351
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    File URL: http://eprints.lse.ac.uk/58351/
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    References listed on IDEAS

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    6. Jonathan Jones & Colin Wren, 2011. "On the Relative Importance of Agglomeration Economies in the Location of FDI Across British Regions," SERC Discussion Papers 0089, Centre for Economic Performance, LSE.
    7. Basile, Roberto & Castellani, Davide & Zanfei, Antonello, 2008. "Location choices of multinational firms in Europe: The role of EU cohesion policy," Journal of International Economics, Elsevier, vol. 74(2), pages 328-340, March.
    8. Colin Wren & Jonathan Jones, 2012. "FDI Location across British Regions and Agglomerative Forces: A Markov Analysis," Spatial Economic Analysis, Taylor & Francis Journals, vol. 7(2), pages 265-286, June.
    9. Crozet, Matthieu & Mayer, Thierry & Mucchielli, Jean-Louis, 2004. "How do firms agglomerate? A study of FDI in France," Regional Science and Urban Economics, Elsevier, vol. 34(1), pages 27-54, January.
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    15. Wren, Colin & Jones, Jonathan, 2009. "Re-investment and the survival of foreign-owned plants," Regional Science and Urban Economics, Elsevier, vol. 39(2), pages 214-223, March.
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    More about this item

    Keywords

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

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • 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

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