Geographical industry concentration in Europe compared to USA Göran Lindqvist Stockholm School of Economics

Is industry concentration higher in 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 2008 Economic Geography - Utrecht

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?

Two types of data 10 September 2008 Economic Geography - Utrecht 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 10 September 2008 Economic Geography - Utrecht Number of cells: J· N Region 1 Region 2 … Region N Ind. group 1 Ind. group 2 … Ind. group J industry concentration regional specialisation polarization

The analytical problems 10 September 2008 Economic Geography - Utrecht  industry aggregation ?  industry coverage?  regional aggregation ? Region 1 Region 2 … Region N Ind. group 1 Ind. group 2 … Ind. group J

The analytical problems 10 September 2008 Economic Geography - Utrecht  comparing two continents ? ( polarisation ) Reg a 1 Reg a 2 … Reg a N Reg b 1 Reg b 2 … Reg b M Ind. grp 1 Ind. grp 2 … Ind. grp J

Previous studies 10 September 2008 Economic Geography - Utrecht Study Comparison Regions Industries Measure Consolidated value EUR 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 applicable Bayoumi and Prasad (1997) "real output" 8 (nat) 8 8 manufacturing and services CV none Braunerhjelm et al., 2000 not reported not reported not 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 Gini unweighted average vehicle 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 2008 Economic Geography - Utrecht

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

Results: Industry by industry (Gini) 10 September 2008 Economic Geography - Utrecht

Results: Polarisation 10 September 2008 Economic Geography - Utrecht * Averages weighted by employment in traded industries. * Averages weighted by employment in traded industries. 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

Results: GE variations 10 September 2008 Economic Geography - Utrecht

Results: SLQ variations 10 September 2008 Economic Geography - Utrecht

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 2008 Economic Geography - Utrecht

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 2008 Economic Geography - Utrecht Cluster category Examples of industries EUR empl. (th.) USA empl (th.) Aerospace Aerospace industry, aerospace engines 365 445 Agricultural Products Sugar, agricultural services, alcoholic drinks 853 349 Analytical Instruments Measurement instruments, process control 532 677 Apparel Clothes 1 872 411 Automotive Motor vehicles, components 2 667 1 351 Biopharmaceuticals Pharmaceuticals 825 290 Building Fixtures, Equipment & Services Kitchen furnishing, plaster 2 373 714 Business Services Management consultancy, rental of office machinery 3 983 5 352 Chemical Products Chemicals, nuclear fuels, industrial gases 971 458 Communications Equipment TVs, Cable, telephony equipment 790 358 Construction Materials Scrap, ceramic sanity fixtures 588 213 Distribution Services Mail order, wholesale trading 1 643 1 816 Education & Knowledge Creation Universities, libraries 3 493 2 504 Entertainment Video- and music recording, sport events 2 168 1 151 Financial Services Banks, insurance companies 7 119 2 789 Fishing & Fishing Products Fishing, hunting 355 56 Footwear Shoes 488 25 Products Paper machines, pulp 1 717 444 Furniture Furniture, laminated boards 1 165 396 Heavy Construction Services Construction businesses, rental of construction machineries 6 447 1 598 Heavy Machinery machinery, tractors, locomotives 830 359 Hospitality & Tourism Hotels, taxies, amusement parks 3 628 2 530 Information Technology Electronic components, computer manufacturing 1 991 964 Jewellery & Precious Metals Jewellery, cutleries 315 127 Leather Products Bags, furs 182 117 Lighting & Electrical Equipment Lamps, electricity distribution's equipment 531 298 Medical Devices Medical equipment, wheelchairs 440 397 Metal Manufacturing Rolling mills, casting, tools, screws 3 934 1 315 Oil & Gas Products and Services Refineries 359 403 Plastics Plastics, colours 822 834 Power Generation and Transmission Generators, isolators 517 78 Processed Food Beer, dairies, glass packages/wrapping 5 032 1 520 Production Technology Bearings, tanks, machine tools 2 240 652 Publishing & Printing Publishing services, printing 1 674 996 Sporting, Recreational & Children's Goods Bicycles, toys 196 107 Textiles Fabrics 1 887 428 Tobacco Cigarettes, snuff 76 33 Transportation & Logistics Inventories, air transports 6 062 1 550

Polarisation formulas Gini Krugman GE( α) 10 September 2008 Economic Geography - Utrecht concentration polarisation

Gini

Krugman

GE( α)