Measuring the Localization of Economic Activity: A Parametric Approach

23 Pages Posted: 27 Aug 2007

See all articles by Paulo Guimaraes

Paulo Guimaraes

University of South Carolina - Darla Moore School of Business; IZA Institute of Labor Economics

Octávio Figueiredo

Universidade do Porto - Faculdade de Economia (FEP)

Douglas P. Woodward

University of South Carolina

Abstract

The index proposed by Ellison and Glaeser (1997) is now well established as the preferred method for measuring the localization of economic activity. In this paper we develop an alternative localization measure that is consistent with the theoretical framework originally proposed by Ellison and Glaeser. Our measure follows directly from the Random Utility (Profit) Maximization (RUM) location decision model. Because the distributional assumptions in our model are fully compatible with RUM, we are able to offer a more efficient measure of industry clustering.

Suggested Citation

Guimaraes, Paulo and Figueiredo, Octavio and Woodward, Douglas P., Measuring the Localization of Economic Activity: A Parametric Approach. Journal of Regional Science, Vol. 47, No. 4, pp. 753-774, October 2007, Available at SSRN: https://ssrn.com/abstract=1008616 or http://dx.doi.org/10.1111/j.1467-9787.2007.00527.x

Paulo Guimaraes (Contact Author)

University of South Carolina - Darla Moore School of Business ( email )

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IZA Institute of Labor Economics

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Germany

Octavio Figueiredo

Universidade do Porto - Faculdade de Economia (FEP) ( email )

Rua Roberto Frias
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Porto, 4200-464
Portugal

Douglas P. Woodward

University of South Carolina ( email )

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803-777-9344 (Fax)

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