The scope of agglomeration economies: Evidence from Catalonia.

This paper is an empirical study of the geographic and industrial scope of agglomeration economies. We also explore if small establishments make better neighbours than their larger counterparts. We address these issues by studying the effects of local industrial characteristics on the location decisions of new establishments using the random profit maximization framework. We carry out separate econometric estimations for seven industries in Catalonia, a Spanish region, using data from 1995–2002. Agglomeration economies seem to work at a very local level. Evidence of localization, urbanization and diversity effects is found. There is no strong evidence that establishments prefer to be located near to small rather than large establishments. [ABSTRACT FROM AUTHOR]