Spatial Localization In Manufacturing: A Cross-country Analysis

This paper employs a homogenous firm's database to investigate industry localization in European countries. More specifically, the authors compare, across industries and countries, the predictions of two of the most popular localization indices, i.e., the Ellison and Glaeser index (Ellison and Glaeser, 1997) and the Duranton and Overman index (Duranton and Overman, 2005). They find that, independently from the index used, localization is a pervasive phenomenon in all countries studied, but the degree of localization is very uneven across industries in each country. Furthermore, they find that the two indices significantly diverge in predicting the intensity of the forces generating localization within each industry.