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

Colin Wren

SERC Discussion Papers from Centre for Economic Performance, LSE

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.

Keywords: Industrial location; agglomeration forces; geographic concentration index; spillovers; temporal scope (search for similar items in EconPapers)
JEL-codes: L10 R12 R30 (search for similar items in EconPapers)
Date: 2011-11
New Economics Papers: this item is included in nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:cep:sercdp:0094

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