Spatial distribution of economic activities: a network approach

Abstract

The aim of this paper is to analyse co-location patterns of manufactures and service industries at a microgeographic level using Spanish data from the Mercantile Register. Our approach allows us to analyse joint-location and co-location patterns of firms in different industries, and to overcome previous technical constraints in this type of analyses, partially thanks to using homogeneous cells instead of administrative units. This paper contributes to the empirical literature on industry location by developing a multisectorial co-location index computed by comparing differences between observed data about firms’ location and randomly generated data. Multisectorial relationships are analyzed by transposing bilateral relations onto an n-dimensional space. Our results show that dispersed industries tend to locate jointly and that industries with lower joint-location patterns have spatial structures similar to those obtained through input–output relationships, suggesting weak role of co-location patterns as interindustry linkages are not the main location determinants.

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Fig. 1

Source: Arbia (2001)

Fig. 2

Source: own calculations

Fig. 3
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Notes

  1. 1.

    Nevertheless, apart from these methodologies there is as well an extensive list of alternative approaches (see for instance Van Egeraat et al. 2016, for a review). The reason for the distinction between Clusters and Industrial Districts was to use widely known concepts (Industrial Districts and Clusters) in order to group contributions into those that consider some subjective determinants as trust among economic agents (Industrial Districts), and those that only consider some objective characteristics (Clusters).

  2. 2.

    There are also other approaches such as those that use the stochastic Point Pattern methodology and those that use Neuronal Networks for pattern recognition. However, these approaches are not able to perform the multisectorial analyses that are the goal of this paper.

  3. 3.

    In this paper we carry out an introductory analysis from a national (aggregated) point of view, and although an alternative urban approach is also reasonable, we have left urban issues for further contributions.

  4. 4.

    In this paper, “spatial proximity” means to be located in the same cell.

  5. 5.

    See Openshaw and Taylor (1979) for a detailed analysis and Wrigley (1995) for a further review.

  6. 6.

    The influence of spatial units on the analysis of firm location has been studied in Arauzo-Carod and Manjón-Antolín (2004) and Arauzo-Carod (2008). See Olsen (2002) for a discussion of the units to be used in geographical economics.

  7. 7.

    Although Duranton and Overman (2008) use the terms joint-localization and co-location, for the sake of simplicity, we will refer to them simply as joint-location and co-location.

  8. 8.

    It is worth noting that the data set refers to firms (not establishments) and that each firm could have more than one establishment. Nevertheless, not taking into account multi-plant firms is not a major problem, as only around 1% of firms in Spain are multi-plant (see Jofre-Monseny et al. 2015, for details).

  9. 9.

    Albert et al. (2012) perform a quite similar analysis using the same dataset, which has also been used by other scholars including Acosta et al. (2011) and Boix and Galletto (2008).

  10. 10.

    Other alternative statistical sources such as the Censo de Locales (INE) are not currently updated, although having firms as observation units instead of establishments also provides useful information since it highlights the role of municipalities when firms are choosing where to locate their headquarters.

  11. 11.

    There are alternative datasets such as DIRCE (INE) but the geographical location of the firms is highly spatially aggregated.

  12. 12.

    The Spanish Input Output matrix is from 2000 and covers all economic industries at 2 digits of NACE classification (Spanish National Statistics Institute).

  13. 13.

    We tested several alternative cell sizes (5 km * 5 km, 20 km * 20 km, 25 km * 25 km, and 50 km * 50 km) but the results were essentially unchanged.

  14. 14.

    The cells’ size is obviously related to the total area analysed. A similar approach is used by Larsson and Öner (2014) in their analysis of Swedish retail markets in metropolitan areas. Nevertheless, as they focus on smaller areas the cells also become smaller, at 250 m * 250 m.

  15. 15.

    By way of an example, municipality sizes in Spain range from 5 to 1000 km2.

  16. 16.

    This is a (simple) starting point that could be easily improved by taking into account the intensity of land use, considering certain indicators such as the number of jobs, the production value and levels of sales, among others. This should allow the expected results to be compared with real results to determine the number of jobs, for example. However, there are also some (potential) limitations regarding data accuracy.

  17. 17.

    Nevertheless, the main problems concern the heterogeneity of firm size, so it seems that a better solution would be to use the size of firms (e.g. the number of employees) rather than just the number (or the existence) of firms.

  18. 18.

    This latter requirement implies that firms localise randomly inside “occupied” cells (i.e. areas where real firms are located) as suggested by Duranton and Overman (2008). This approach means that firms are expected to be located only in those places that are available for economic activity (as the real data shows). Unfortunately, a major shortcoming of this approach is that it assumes that firms could be located elsewhere with other firms, regardless of the industry they are involved in, which is not as realistic (especially at a 2/3-digit level). An extension of this study (and a possible solution to this shortcoming) would be to regard manufacturing, services and agricultural firms as being located with other firms from the fields of manufacturing, services and agriculture, respectively.

  19. 19.

    A literature review of classical indexes used in regional analyses can be found in Isard (1960), whilst notable recent approaches to the spatial distribution of industries are those by Hoffmann et al. (2016), Bickenbach et al. (2013) or Mulligan and Schmidt (2005), among others.

  20. 20.

    The idea about “equivalence” was suggested by a reviewer of this paper.

  21. 21.

    These regular cells have an area of 100 km2 (10 km * 10 km).

  22. 22.

    As an example, indices of high-tech industries such as Office machinery, computers and medical equipment, Precision and optical instruments (0.644) and Electrical machinery and apparatus (0.664) are clearly lower than those of some low-tech industries such as Food, beverages and tobacco (1.452) and Agriculture and fishing (1.424).

  23. 23.

    Specifically, Textiles, leather clothes and shoes, Paper and publishing, Rubber and plastic products, Machinery and equipment, Business services and Health and veterinary activities.

  24. 24.

    If an industry is joint-located with the same industry the value of the index is 1. In terms of the novelty of this proposal, it is similar to Correspondence Analysis, but the approach proposed by this paper is more appropriate because there are no information loses linked to dimensionality reduction. Among other advantages, we may highlight that there are no random biases in measures derived from criteria used for histogram construction given that spatial position is unique.

  25. 25.

    One reviewer suggested that our method could be similar to that of correspondence analysis, but we consider that though there are some similarities our proposal is more appropriate because there are no information loses linked to dimensionality reduction. Among other advantages of our proposal, we may highlight that there are no random biases in measures derived from criteria used for histogram construction given that spatial position is unique. Consequently, although if this is not a correspondence analysis in that case we would prefer Hellinger distance rather than Chi2 (Rao 1995).

  26. 26.

    Using a geometric perspective, they are close to the bisectriz.

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Acknowledgements

We are grateful to the seminar participants at the 12th EUNIP Conference (Universitat Rovira i Virgili) and at the International Meeting on Regional Science (Universidad de Badajoz), and especially to Anxo Sánchez for his valuable comments. Any errors are, of course, our own.

Funding

This paper was partially funded by ECO2014-55553-P, ECO2013-42310-R, the “Xarxa de Referència d’R+D+I en Economia i Polítiques Públiques”, the SGR programme (2014 SGR 299) of the Government of Catalonia and the R&D Spanish project ‘CITiTALENT’, CSO2016-74888-C4-4-R (AEI/FEDER, UE).

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Correspondence to Josep-Maria Arauzo-Carod.

Appendix

Appendix

See Table 6.

Table 6 List of industries.

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Pablo-Martí, F., Arauzo-Carod, JM. Spatial distribution of economic activities: a network approach. J Econ Interact Coord 15, 441–470 (2020). https://doi.org/10.1007/s11403-018-0225-8

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Keywords

  • Clusters
  • Microgeographic data
  • Network analysis
  • Firm location

JEL Classification

  • R10
  • R12
  • R34