Geographical industry concentration in Europe compared to USA

Geographical industry concentration in Europe compared

to USAGöran Lindqvist

Stockholm School of Economics

Is industry concentration higherin the US than in Europe?

A stylised fact, since Krugman’s study in 1991

Implications: What shifts in industry localisation can we expect

as European integration proceeds? Can increased industry concentration be one

answer to the Lisbon agenda?

10 September 20082 Economic Geography - Utrecht

Two types of data

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23

2

8 3

7

11

21

4

12

16

7

8

4

12

7

Geocoded datapoints(firms, plants or persons)

Regional totals

10

4

7

19

6

Concentration and specialisation

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Region 1

Region 2

…Region

N

Ind. group 1

Ind. group 2

…

Ind. group J

industry concentration

regionalspecialisati

on

polarization

Number of cells: J· N

The analytical problems

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Region 1

Region 2

…Region

N

Ind. group 1

Ind. group 2

…

Ind. group J

industry aggregation ?

industry coverage?

regional

aggregation ?

The analytical problems

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Rega 1 Rega 2 …Rega

NRegb 1 Regb 2 …

Regb M

Ind. grp 1

Ind. grp 2

…

Ind. grp J

comparing two

continents ?(polarisation)

Previous studies

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Study Comparison Regions Industries Measure Consolidated valueEUR USA groups coverage

Krugman (1991)

employment 4 (nat) 4 not reported manufacturing Krugman index none

auto production 4 (nat) 4 1 single sector CR not applicableBayoumi and Prasad (1997)

"real output" 8 (nat) 8 8 manufacturing and services CV none

Braunerhjelm et al., 2000

not reportednot

reportednot

reported 8 manufacturing Krugman index none

GDP, GDP per capita 50 49 1 not applicable CV not applicable

Midelfart-Knarvik et al., 2000

production 14 (nat) 51 21 manufacturing Giniunweighted

averagevehicle

production 14 (nat) 51 1 single sector CR not applicable

production 14 (nat) 49 21 manufacturing spatial separation

unweighted average

WIFO (2002)

VA 70 49 1 manufacturing CR10%, CR30%, CV, Gini not applicable

employment 76 49 1 manufacturing CR10%, CR30%, CV, Gini not applicable

VA 70 49 10 manufacturing CR10%, CR30%, CV, Gini none

employment 76 49 10 manufacturing CR10%, CR30%, CV, Gini none

The current study

Regions: Europe: 259 NUTS2 regions USA: 179 Economic Areas

Industry groups: 38 industry groups, based on co-location patterns Manufacturing and services, based on concentration

tendency Total number of cells in the matrix:

16.600 cells in this study, compared to… …1.400 cells in the most detailed previous study

Comparison: I calculate the polarisation value for each continent

10 September 20088 Economic Geography - Utrecht

Results: Industry by industry (Gini)

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Instruments

Apparel

Footwear

TextilesAerospace

Oil & Gas

Tobacco

Leather

Bus. Services

Forest

Construction

Transport

0.00

0.25

0.50

0.75

1.00

0.00 0.25 0.50 0.75 1.00

Gini, EUR

Gini

, USA

= 2 mn employees

Results: Polarisation

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Polarisation value No. of cluster categories

Measure EUR USA EUR higher USA higher

Gini 0.504 0.587 6 32

Krugman 0.709 0.844 7 31

Theil 0.502 0.719 7 31

GE(2) 0.985 1.824 6 32

GE(3) 5.352 15.357 10 28

SLQ(2) 0.207 0.206 16 22

CR(10%)* 0.391 0.568 1 37

Herfindahl * 0.011 0.033 1 37

* Averages weighted by employment in traded industries.

* Averages weighted by employment in traded industries.

Results: GE variations

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0

1

10

100

1 2 3 4

% o

f em

ploy

men

t in

regi

ons w

ith

LQ>λ

λ

Automotive

EU US

Results: SLQ variations

10 September 2008Economic Geography - Utrecht12

0%

20%

40%

60%

80%

100%

0 1 2 3 4

% o

f em

ploy

men

t in

regi

ons w

ith

LQ>λ

λ

Automotive

EU US

0%

20%

40%

60%

80%

100%

0 1 2 3 4

% o

f em

ploy

men

t in

regi

ons w

ith

LQ>λ

λ

Financial servicesEU US

Conclusion

More detailed data, … highly increased geographical granularity highly increased industrial granularity

… more sophisticated aggregations… improved industry coverage selection methodology industry grouping based on actual co-location

patterns … and more rigorous mathematical comparisons

… polarization calculations

… support the conclusion that industry concentration is higher in USA than in Europe

10 September 200813 Economic Geography - Utrecht

10 September 2008Economic Geography - Utrecht14

Cluster category Examples of industries EUR empl. (th.) USA empl (th.)

Aerospace Aerospace industry, aerospace engines 365 445Agricultural Products Sugar, agricultural services, alcoholic drinks 853 349Analytical Instruments Measurement instruments, process control 532 677Apparel Clothes 1 872 411Automotive Motor vehicles, components 2 667 1 351Biopharmaceuticals Pharmaceuticals 825 290Building Fixtures, Equipment & Services Kitchen furnishing, plaster 2 373 714Business Services Management consultancy, rental of office machinery 3 983 5 352Chemical Products Chemicals, nuclear fuels, industrial gases 971 458Communications Equipment TVs, Cable, telephony equipment 790 358Construction Materials Scrap, ceramic sanity fixtures 588 213Distribution Services Mail order, wholesale trading 1 643 1 816Education & Knowledge Creation Universities, libraries 3 493 2 504Entertainment Video- and music recording, sport events 2 168 1 151Financial Services Banks, insurance companies 7 119 2 789Fishing & Fishing Products Fishing, hunting 355 56Footwear Shoes 488 25Products Paper machines, pulp 1 717 444Furniture Furniture, laminated boards 1 165 396Heavy Construction Services Construction businesses, rental of construction machineries 6 447 1 598Heavy Machinery machinery, tractors, locomotives 830 359Hospitality & Tourism Hotels, taxies, amusement parks 3 628 2 530Information Technology Electronic components, computer manufacturing 1 991 964Jewellery & Precious Metals Jewellery, cutleries 315 127Leather Products Bags, furs 182 117Lighting & Electrical Equipment Lamps, electricity distribution's equipment 531 298Medical Devices Medical equipment, wheelchairs 440 397Metal Manufacturing Rolling mills, casting, tools, screws 3 934 1 315Oil & Gas Products and Services Refineries 359 403Plastics Plastics, colours 822 834Power Generation and Transmission Generators, isolators 517 78Processed Food Beer, dairies, glass packages/wrapping 5 032 1 520Production Technology Bearings, tanks, machine tools 2 240 652Publishing & Printing Publishing services, printing 1 674 996Sporting, Recreational & Children's Goods Bicycles, toys 196 107Textiles Fabrics 1 887 428Tobacco Cigarettes, snuff 76 33Transportation & Logistics Inventories, air transports 6 062 1 550

Polarisation formulas

Gini

Krugman

GE(α)

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