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Testing for localization using micro-geographic data

Duranton, Gilles and Overman, Henry G. (2005) Testing for localization using micro-geographic data. Review of Economic Studies, 72 (4). pp. 1077-1106. ISSN 1467-937X

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Abstract

To study the detailed location patterns of industries, and particularly the tendency for industries to cluster relative to overall manufacturing, we develop distance-based tests of localisation. In contrast to previous studies, our approach allows us to assess the statistical significance of departures from randomness. In addition, we treat space as continuous instead of using an arbitrary collection of geographical units. This avoids problems relating to scale and borders. We apply these tests to an exhaustive UK data set. For four-digit industries, we find that (i) 52% of them are localised at a 5% confidence level, (ii) localisation mostly takes place at small scales below 50 kilometres, (iii) the degree of localisation is very skewed, and (iv) industries follow broad sectoral patterns with respect to localisation. Depending on the industry, smaller establishments can be the main drivers of both localisation and dispersion. Three-digit sectors show similar patterns of localisation at small scales as well as a tendency to localise at medium scales.

Item Type: Article
Official URL: http://www.blackwellpublishing.com/journals/ROES
Additional Information: This is an electronic version of an Article published in the Review of economic Studies 72 (4), pp. 1077-1106 © 2005 Blackwell Publishing. The definitive version is available at www.blackwell-synergy.com. LSE has developed LSE Research Online so that users may access research output of the School. Copyright and Moral Rights for the papers on this site are retained by the individual authors and/or other copyright owners. Users may download and/or print one copy of any article(s) in LSE Research Online to facilitate their private study or for non-commercial research. You may not engage in further distribution of the material or use it for any profit-making activities or any commercial gain. You may freely distribute the URL (<http://eprints.lse.ac.uk>) of the LSE Research Online website.
Library of Congress subject classification: H Social Sciences > HB Economic Theory
Sets: Departments > Geography and Environment
Collections > Economists Online
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 24 Jan 2006
URL: http://eprints.lse.ac.uk/581/

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