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Localization and Co-Localization within an Urban Area

Listed author(s):
  • Stephen Billings

    ()

  • Erik Johnson

Urban economists hypothesize that industrial diversity matters for urban growth and development, but metrics for empirically testing this relationship are limited to simple concentration metrics (e.g. location quotient) or summary diversity indices (e.g. Gini, Herfindahl). As shown by recent advances in how we measure localization and specialization, these measures of industrial diversity may be subject to bias under small samples or the Modifiable Areal Unit Problem. Furthermore, empirically examining industrial diversity requires statistically testing for patterns of industry mix that deviate from random firm location. Extending recent work by [S. Billings & E. Johnson. 2012. A Nonparametric Test for Industrial Specialization. Journal of Urban Economics. 71(3):312-331.], we develop a nonparametric microdata based test for industrial co-specialization. Our test employs establishment densities for specific pairs of industries, a population counterfactual, and a new correction for multiple hypothesis testing to determine the statistical significance of co-specialization across both places and industries. The results of these pairwise tests are then mapped out as networks of proximate industries unique to each place within our study area. We use pairs and triads of industries to highlight specific four digit industries that may drive co-specialization and a larger network of industrial diversification. Results give us new understanding of the relationship between industrial co-specialization and urbanization, with manufacturing industries tending to be more co-specialized in less dense areas than business services, while business services show more connected and transitive spatial networks. Finally, we discuss the role that intransitivities in industry triads may play in the econometric identification of co-specialization and underlying place specific agglomerative forces.

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File URL: http://www-sre.wu.ac.at/ersa/ersaconfs/ersa12/e120821aFinal00571.pdf
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Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa12p569.

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Date of creation: Oct 2012
Handle: RePEc:wiw:wiwrsa:ersa12p569
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  1. Gilles Duranton & Henry G. Overman, 2008. "Exploring The Detailed Location Patterns Of U.K. Manufacturing Industries Using Microgeographic Data," Journal of Regional Science, Wiley Blackwell, vol. 48(1), pages 213-243.
  2. Thomas H. Klier & Daniel P. McMillen, 2006. "Evolving agglomeration in the U.S. auto supplier industry," Working Paper Series WP-06-20, Federal Reserve Bank of Chicago.
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  8. Octávio Figueiredo & Paulo Guimarães & Douglas Woodward, 2009. "Localization economies and establishment size: was Marshall right after all? -super-†," Journal of Economic Geography, Oxford University Press, vol. 9(6), pages 853-868, November.
  9. Glenn Ellison & Edward L. Glaeser, 1994. "Geographic Concentration in U.S. Manufacturing Industries: A Dartboard Approach," NBER Working Papers 4840, National Bureau of Economic Research, Inc.
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  11. Glaeser, Edward Ludwig & Kallal, Hedi D. & Scheinkman, Jose A. & Shleifer, Andrei, 1992. "Growth in Cities," Scholarly Articles 3451309, Harvard University Department of Economics.
  12. Gilles Duranton & Henry G. Overman, 2002. "Testing for localisation using micro-geographic data," LSE Research Online Documents on Economics 20071, London School of Economics and Political Science, LSE Library.
  13. Joseph P. Romano & Michael Wolf, 2003. "Stepwise multiple testing as formalized data snooping," Economics Working Papers 712, Department of Economics and Business, Universitat Pompeu Fabra.
  14. McMillen, Daniel P., 2001. "Nonparametric Employment Subcenter Identification," Journal of Urban Economics, Elsevier, vol. 50(3), pages 448-473, November.
  15. J. Vernon Henderson & Mohammad Arzaghi, 2005. "Networking Off Madison Avenue," Working Papers 05-15, Center for Economic Studies, U.S. Census Bureau.
  16. Thomas J. Holmes & John J. Stevens, 2002. "Geographic Concentration and Establishment Scale," The Review of Economics and Statistics, MIT Press, vol. 84(4), pages 682-690, November.
  17. Anderson, Michael L., 2008. "Multiple Inference and Gender Differences in the Effects of Early Intervention: A Reevaluation of the Abecedarian, Perry Preschool, and Early Training Projects," Journal of the American Statistical Association, American Statistical Association, vol. 103(484), pages 1481-1495.
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