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MEASURING THE LOCALIZATION OF ECONOMIC ACTIVITY: A PARAMETRIC APPROACH

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Abstract:

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.

Document Type: Research Article

DOI: https://doi.org/10.1111/j.1467-9787.2007.00527.x

Affiliations: 1: University of South Carolina, Columbia, SC 29208., Email: guimaraes@moore.sc.edu 2: Universidade do Porto and CEMPRE, 4200-464 Porto, Portugal., Email: octavio@fep.up.pt 3: University of South Carolina, Columbia, SC 29208., Email: woodward@moore.sc.edu

Publication date: 2007-10-01

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