A unified framework for measuring industry location characteristics based on marked spatial point processes

Abstract

We propose a unified framework for defining measures of industrial concentration based on micro-geographic data. These encompass the Duranton-Overman and the Marcon-Puech indices. We discuss the basic requirements for such measures introduced by Duranton and Overman (2005) and we propose five additional requirements. The framework we propose is based on some second order characteristics of marked spatial point processes discussed in Illian et al. (2008). We model the positions of firms as a spatial point pattern and their size (number of employees) as a corresponding mark. We describe several types of concentration depending on the second order characteristics of the marginal patterns of positions and of marks but also on their mutual dependence. We also discuss the null assumptions classically used for testing aggregation of a particular sector. The general measure we introduce involves a cumulative and a non-cumulative version. This allows us to propose an alternative version of the Duranton-Overman index with a proper baseline as well as a cumulative version of this index and to discuss a modified Marcon-Puech index as well as a corresponding non cumulative version. We present some simulation cases to illustrate the arguments.