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Testing for Localization Using Micro-Geographic Data

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Duranton, Gilles, Overman, Henry G.·2005·The Review of Economic Studies

Abstract

To study the detailed location patterns of industries, and particularly the tendency for industries to cluster relative to overall manufacturing, we develop distance-based tests of localization. In contrast to previous studies, our approach allows us to assess the statistical significance of departures from randomness. In addition, we treat space as continuous instead of using an arbitrary collection of geographical units. This avoids problems relating to scale and borders. We apply these tests to an exhaustive U.K. data-set. For four-digit industries, we find that (i) 52% of them are localized at a 5% confidence level, (ii) localization mostly takes place at small scales below 50 km, (iii) the degree of localization is very skewed, and (iv) industries follow broad sectoral patterns with respect to localization. Depending on the industry, smaller establishments can be the main drivers of both localization and dispersion. Three-digit sectors show similar patterns of localization at small scales as well as a tendency to localize at medium scales.

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Metadata

Authors
Duranton, G., & Overman, H. G.
Venue
The Review of Economic Studies
Published
2005-10
Volume
72
Issue
4
Pages
1077-1106
ISSN
  • 0034-6527 (ISSN-L)
  • 1467-937X
OpenAlex
W1533907815
Cited by
1,016
References
15
FWCI
69.47
Type
journal article
Language
en
Open access
bronze

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CoChat. (2026). Citation check: Testing for Localization Using Micro-Geographic Data. https://app.cochat.ai/papers/10.1111/0034-6527.00362
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Duranton, G., & Overman, H. G. (2005). Testing for Localization Using Micro-Geographic Data. The Review of Economic Studies. https://doi.org/10.1111/0034-6527.00362

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