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MEASURING THE LOCALIZATION OF ECONOMIC ACTIVITY: A PARAMETRIC APPROACH *
Author(s) -
Guimarães Paulo,
Figueiredo Octávio,
Woodward Douglas
Publication year - 2007
Publication title -
journal of regional science
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.171
H-Index - 79
eISSN - 1467-9787
pISSN - 0022-4146
DOI - 10.1111/j.1467-9787.2007.00527.x
Subject(s) - profit maximization , measure (data warehouse) , utility maximization , parametric statistics , cluster analysis , econometrics , index (typography) , maximization , computer science , profit (economics) , economics , mathematical economics , mathematics , data mining , microeconomics , statistics , artificial intelligence , world wide web
The index proposed by Ellison and Glaeser (1997) is now well established as the preferred method for measuring the localization of economic activity. In this paper we develop an alternative localization measure that is consistent with the theoretical framework originally proposed by Ellison and Glaeser. Our measure follows directly from the Random Utility (Profit) Maximization (RUM) location decision model. Because the distributional assumptions in our model are fully compatible with RUM, we are able to offer a more efficient measure of industry clustering.