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Journal of Economic Geography 2004 4(5):565-582; doi:10.1093/jnlecg/lbh040
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Journal of Economic Geography, Vol. 4, No. 5, © Oxford University Press 2004; all rights reserved.

Agglomeration economies and industrial location: city-level evidence

Elisabet Viladecans-Marsal*

* Departament d'Econometria, Estadística i Economia Espanyola, Facultat de Ciències Economiques i Empresarials, Universitat de Barcelona, Avda. Diagonal, 690, 08034 Barcelona, Spain. email <eviladecans{at}ub.edu>

Abstract

There is clear evidence that economic activity, in particular industrial activity, is unequally located in Spain. Further, the results from the analysis of single manufacturing sectors show an even higher spatial concentration. The aim of this paper is to demonstrate the extent to which agglomeration economies account for this high industrial concentration. To this end, I analyse the influence of various types of agglomeration on the location of manufacturing employment in Spanish cities. I consider two types of agglomeration economies: urbanization economies (associated with a city's population and employment levels and the diversity of its productive structure) and localization economies (associated with a city's specialization in one specific sector). Special attention is given to the geographical unit of analysis by employing spatial econometric techniques that allow the influence of agglomeration effects extending beyond a city's limits to be considered. The results demonstrate that agglomeration economies influence the location of manufacturing activity, with most sectors being influenced by urbanization economies and a few by localization economies. In some sectors, population or employment levels in neighboring cities were found to enhance a city's agglomeration economies.

Keywords: Agglomeration economies, cities, industrial location,
JEL classifications: R30, C5, L60
Date submitted: 26 January 2003     Date accepted: 26 March 2004


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