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Journal of Economic Geography Advance Access originally published online on March 9, 2009
Journal of Economic Geography 2009 9(6):853-868; doi:10.1093/jeg/lbp007
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© The Author (2009). Published by Oxford University Press. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org

Localization economies and establishment size: was Marshall right after all?{dagger}

Octávio Figueiredo*, Paulo Guimarães** and Douglas Woodward***

*Faculdade de Economia, Universidade do Porto, 4200 Porto, Portugal and CEMPRE, Universidade do Porto, 4200 Porto, Portugal email <octavio@fep.up.pt>.
**Division of Research and Department of Economics, Moore School of Business, University of South Carolina, Columbia, SC 29208, USA, and CEMPRE, Universidade do Porto, 4200 Porto, Portugal and IZA Bonn, Germany. email <guimaraes@moore.sc.edu>.
***Division of Research and Department of Economics, Moore School of Business, University of South Carolina, Columbia, SC 29208, USA. email <woodward@moore.sc.edu>

JEL classifications:: R12, R39, L11

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 (1997, 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 (2002, 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
Date submitted: 22 February 2008     Date accepted: 22 January 2009


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