Measuring industry co-location across county borders

Zheng Tian, Paul D. Gottlieb and Stephan J. Goetz

Spatial Economic Analysis, 2020, vol. 15, issue 1, 92-113

Abstract: The location quotient (LQ) measures regional industry concentration with the advantages of easy calculation and interpretation. However, it is a weak method for identifying industry clusters that consist of related industries geographically concentrated in contiguous counties. This paper proposes a new spatial input–output location quotient (SI-LQ) accounting for both the co-location of related industries and the spatial spillover of concentration into neighbouring counties. A bootstrap method is used to determine the cut-off values of the new measure. The practical advantages of the SI-LQ over the traditional LQ include attenuation of the extreme values of the LQ in less populous and remote counties and the identification of large substantive clusters. The SI-LQ outperforms the LQ in a regression analysis of the effect of industry concentration on total employment growth.

Date: 2020
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DOI: 10.1080/17421772.2020.1673898

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