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Testing for Localization with Entropy-Based Measures

Author

Listed:
  • Roy Cerqueti

    (Sapienza University of Rome
    London South Bank University)

  • Eleonora Cutrini

    (University of Macerata)

Abstract

This paper aims to give statistical significance to the measurement of spatial concentration in the context of entropy-based approaches. We simulate confidence intervals based on a null hypothesis able to capture systematic spatial concentration of firms from random patterns, and dissimilarities between the distributions of firms and employees. We implement this two-step methodology to the European manufacturing economy, and we find a substantive spatial clustering of establishments whereby the spatial divergence between employees and firms is significant both for small-scale industries typically considered as localized because of industry-specific Marshallian external economies and for those industries characterized by considerable internal scale economies. We suggest that a high heterogeneity in firm size may have positive implications for aggregate competitiveness at the sectoral level.

Suggested Citation

  • Roy Cerqueti & Eleonora Cutrini, 2024. "Testing for Localization with Entropy-Based Measures," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 173(1), pages 227-247, May.
  • Handle: RePEc:spr:soinre:v:173:y:2024:i:1:d:10.1007_s11205-021-02820-6
    DOI: 10.1007/s11205-021-02820-6
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    More about this item

    Keywords

    Statistical testing; Spatial concentration; Entropy measures; Confidence interval;
    All these keywords.

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • C46 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Specific Distributions
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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