Measuring the Localization of Economic Activity: A Random Utility Approach

Paulo Guimaraes, Octávio Figueiredo and Douglas Woodward ()

FEP Working Papers from Universidade do Porto, Faculdade de Economia do Porto

Abstract: The recent index proposed by Ellison & Glaeser (1997) is now well established as the preferred method for measuring the localization of economic activity. We build on McFadden's Random Utility (Profit) Maximization framework, to develop a parametric version of this measure that is more consistent with the theory originally proposed by Ellison and Glaeser (EG). Given that our method is regression based, it goes beyond the descriptive nature of the EG index, allowing us to evaluate how the localization measure behaves with changes in the determinants that drive firms' location decisions.

JEL-codes: C25 R12 R39 (search for similar items in EconPapers)
Pages: 36 pages.
Date: 2004-10
New Economics Papers: this item is included in nep-geo and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:por:fepwps:161

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