Weighting Ripley’s K-function to account for the firm dimension in the analysis of spatial concentration

Abstract

The spatial concentration of firms has long been a central issue in economics both under the theoretical and the applied point of view due mainly to the important policy implications. A popular approach to its measurement, which does not suffer from the problem of the arbitrariness of the regional boundaries, makes use of micro data and looks at the firms as if they were dimensionless points distributed in the economic space. However in practical circumstances the points (firms) observed in the economic space are far from being dimensionless and are conversely characterized by different dimension in terms of the number of employees, the product, the capital and so on. In the literature, the works that originally introduce such an approach (e.g. Arbia and Espa, 1996; Marcon and Puech, 2003) disregard the aspect of the different firm dimension and ignore the fact that a high degree of spatial concentration may result from both the case of many small points clustering in definite portions of space and from only few large points clustering together (e.g. few large firms). We refer to this phenomena as to clustering of firms and clustering of economic activities. The present paper aims at tackling this problem by adapting the popular Kfunction (Ripley, 1977) to account for the point dimension using the framework of marked point process theory (Penttinen, 2006)Agglomeration, Marked point processes, Spatial clusters, Spatial econometrics