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Identifying urbanisation and localisation externalities in manufacturing and service industries

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  • Daniel J Graham

Abstract

This article estimates urbanisation and localisation economies for two digit manufacturing and service industries. The analysis is based on estimation of a translog production‐inverse input demand system using data on British firms. We use distance‐based measures of localisation to test for the spatial transmission of externalities. We identify positive localisation economies for 13 of the 27 sectors examined. The results indicate that where localisation economies exist, they tend to attenuate fairly rapidly with distance. All localisation externalities are identified within a 10 kilometre radius of the firm. Positive elasticities of productivity with respect to urbanisation are identified for 14 sectors. The weighted average localisation elasticity for manufacturing industries is 0.03 and for services 0.01. The mean urbanisation elasticities are 0.07 and 0.19 respectively. Resumen Este artículo estima economías de urbanización y localización para industrias manufactureras y de servicios de dos dígitos. El análisis está basado en la estimación de un sistema translog de producción inversa de demanda de insumos utilizando datos de empresas británicas. Utilizamos medidas de localización basadas en la distancia para comprobar la transmisión espacial de externalidades. Identificamos economías de localización positivas para 13 de los 27 sectores examinados. Los resultados indican que allí donde existen economías de localización, éstas tienden a atenuarse bastante rápidamente en función de la distancia. Todas las externalidades de localización están identificadas dentro de un radio de 10 km de la empresa. Se identifican para 14 sectores elasticidades de producción positivas con respecto a la urbanización. El promedio ponderado de elasticidad de la localización para industrias manufactureras es de 0.03 y para servicios de 0.01. Las medias de elasticidades de la urbanización son 0.07 y 0.19 respectivamente.

Suggested Citation

  • Daniel J Graham, 2009. "Identifying urbanisation and localisation externalities in manufacturing and service industries," Papers in Regional Science, Wiley Blackwell, vol. 88(1), pages 63-84, March.
    • Handle: RePEc:bla:presci:v:88:y:2009:i:1:p:63-84
    DOI: 10.1111/j.1435-5957.2008.00166.x
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