Localization Economies and Establishment Size: Was Marshall Right after All?

Posted: 2 Nov 2009

See all articles by Octávio Figueiredo

Octávio Figueiredo

Universidade do Porto - Faculdade de Economia (FEP)

Paulo Guimaraes

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

Douglas P. Woodward

University of South Carolina

Date Written: November 2009

Abstract

This article re-examines the relationship between industry localization and the employment size of establishments. To measure localization, we use an approach that builds on Ellison and Glaeser's (, Journal of Political Economy, 105: 889-927) dartboard location model. Our localization index is based on plant (establishment) counts and more closely reflects the firm externalities of Marshallian industrial districts, in contrast with broader measures of localization that include an establishment's internal economies, such as Holmes and Steven's (, The Review of Economics and Statistics, 84: 682-690) analysis based on employment location quotients. In line with Alfred Marshall's theory of external economies in industrial districts, we find evidence that plants located in areas where an industry exhibits localization, or excess concentration, are smaller than plants in the same industry outside such areas.

Keywords: localization, external economies, plant size, industrial districts, R12, R39, L11

Suggested Citation

Figueiredo, Octavio and Guimaraes, Paulo and Woodward, Douglas P., Localization Economies and Establishment Size: Was Marshall Right after All? (November 2009). Journal of Economic Geography, Vol. 9, Issue 6, pp. 853-868, 2009, Available at SSRN: https://ssrn.com/abstract=1496709 or http://dx.doi.org/lbp007

Octavio Figueiredo (Contact Author)

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

Rua Roberto Frias
s/n
Porto, 4200-464
Portugal

Paulo Guimaraes

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

1705 College St
Francis M. Hipp Building
Columbia, SC 29208
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Douglas P. Woodward

University of South Carolina ( email )

The Francis M. Hipp Building
1705 College Street
Columbia, SC 29208
United States
803-777-2510 (Phone)
803-777-9344 (Fax)

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