Measuring Agglomeration Using the Standardized Location Quotient with a Bootstrap Method

Abstract

The location quotient is a widely used index to measure agglomeration. However, a problem concerning the usefulness of the location quotient is how to obtain an objective cutoff value to identify the existence of agglomeration for an industry in a region. This paper extends the idea of O’Donoghue and Gleave (2004) and proposes a bootstrap method to determine the cut-off value based on the standardized location quotient. The advantage of our method is that the bootstrap method does not rely on any assumption regarding the statistical distribution of the location quotient, which is a major limitation of O’Donoghue and Gleave’s (2004) approach. Then we apply the method to measure agglomeration of manufacturing industries at the county level in the United States.

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