Agglomeration within an urban area

This paper utilizes a newly created index for colocalization to estimate the determinants of industrial agglomeration within a single urban area. Our new index directly incorporates the location of individual establishments while controlling for the Modifiable Areal Unit Problem (MAUP) in order to create this measure of spatial similarity between two industries. We estimate that proximity to transportation infrastructure and consumers as well as knowledge spillovers largely explain patterns of agglomeration. We find a smaller role for input–output linkages and consumption externalities for retail and consumer service industries.