TITLE:
Do Neighbourhood Effects Matter for the Geographical Concentration? Evidence from the Indian Industries
AUTHORS:
Sugam Agarwal, Smruti Ranjan Behera
KEYWORDS:
Spatially Weighted Ellison-Glaeser Index, Neighbouring Effect, Manufacturing Industries, Service Industries, India
JOURNAL NAME:
Theoretical Economics Letters,
Vol.12 No.4,
August
9,
2022
ABSTRACT: This paper investigates the impact of neighbouring
effects on the geographical concentration of manufacturing and service
industries at the district level using India’s Economic Census (2013) data. As
empirical literature suggests, spillovers do not recognize areal boundaries,
and spatial dependence among regions needs to be incorporated while quantifying
the geographical concentration of industries. In this context, we employ the
spatially weighted Ellison-Glaeser (EG) index to evaluate the impact of
neighbourhood effect on the spatial concentration of 71 manufacturing and 120
service industries in India. Using aggregate data at the district level by
covering 636 districts and 34 states and union territories in India, empirical
results exhibit that the magnitude of the neighbourhood effect does not
substantially impact the geographical concentration of 191 industries. More
specifically, the neighbourhood effect is over-shadowed while considering an
aggregate of 636 districts covering all states and union territories in India.
To gain more insight into the role of neighbourhood effects and for robustness
checks, we measure manufacturing and service industries’ geographical
concentration within India’s 29 contiguous states and union territories. Our subsequent
empirical evidence validates that neighbourhood effects are well captured by
the spatially weighted Ellison-Glaeser index for the top three highly
concentrated manufacturing and service industries. Moreover, we find that the
spatially weighted EG index plays a predominant role while computing
geographical concentration for the highly concentrated manufacturing and
service industries across various Indian states and union territories at the
district level in India.