A Divergence Statistic for Industrial Localization

Tomoya Mori, Koji Nishikimi and Tony E. Smith
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Koji Nishikimi: Institute of Developing Economies. JETRO
Tony E. Smith: University of Pennsylvania

The Review of Economics and Statistics, 2005, vol. 87, issue 4, 635-651

Abstract: We propose a statistical index of industrial localization based on the Kullback-Leibler divergence. This index is particularly well suited to cases where industrial data are available only at the regional level. Unlike existing regional-level indices, our index can be employed to test the significance of industrial localization relative to a hypothesized reference distribution of probable locations across regions. In addition, one can test relative degrees of localization among industries. Finally, as with all Kullback-Leibler divergence indices, our index can be decomposed into components representing localization at various levels of spatial aggregation. © 2005 President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Date: 2005
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