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LOCATE Report Summary

Project ID: 627114
Funded under: FP7-PEOPLE
Country: Spain

Final Report Summary - LOCATE (The Location of Economic Activity in Space: An Intra-city Approach)

Cities are complex systems. They hold together diverse people that hope to benefit from being close to each other, but also have to bear the negative effects of density, such as high rents, pollution and congestion. In them, the poor and the rich, the large and the small, the sophisticated and the simple coexist. Making sense of this complexity is particularly challenging, since it is determined by multiple decisions of households and firms acting under different constrains. Within this context, the project aims at comparing the intra-metropolitan location patterns of different productive activities and socioeconomic groups, and advancing the current knowledge on the relationship between location, density and socioeconomic outcomes to inform the design of sound urban policies.

To analyze intra-metropolitan location patterns in different contexts, in this project we assume a continuous view of space, and focus on the estimation of density using firm-level and fine-grained geolocated socioeconomic panel data. In this way, we try to minimize geographical aggregation biases arising from the use of administrative boundaries. We use the methodological and computational tools from point-pattern analysis to compare density estimations under different assumptions, and understand the limitations of existing clustering and segregation measures. In the project, we study the relationship between intra-metropolitan density and socioeconomic outcomes from two different perspectives: first, the relationship between agglomeration in the neighborhood of firms and entry and exit decisions, and second, the relationship between local employment density and income segregation.

Regarding the first research line, we find that the strength and decay of the local density of own-industry firms in metropolitan areas vary greatly across productive sectors and metropolitan areas. Firms in some traditional manufacturing sectors, and in specialized service sectors, experience a high density of firms in the same sector in their immediate neighborhood (within a 1 km radius), which decays rapidly as distance increases. On the other hand, firms in traditional service sectors display low levels of own-industry agglomeration but high presence of firms in other sectors in their immediate neighborhood. This higher local diversity is positively correlated with entry rates. From our econometric panel-data analysis, we find that the relationship between local own-industry agglomeration and entry rates is negative, controlling for other factors such as local diversity and metropolitan levels of market concentration. This suggests that local density of own-industry firms can act as an entry deterrent for firms in highly specialized clusters of economic activity within metropolitan areas. On the other hand, exit rates do not seem to be determined by local own-industry agglomeration and diversity, suggesting different underlying timing and motivations of exit decisions with respect to localization. These results are relevant for industrial, clustering and urban policies aiming at maximizing the benefits and minimizing the costs of agglomeration for firms in urban areas of different sizes.

Regarding the second research line, to understand the relationship between local employment density and spatial segregation by levels of income, we build measures of the intra-metropolitan distribution of employment and of the extent of segregation experienced by different income-level groups. The first set of measures includes the level of local employment density, the number of employment centers within metropolitan areas, and the level of monocentrism/polycentrism, that is, the extent to which employment concentrates around a unique employment center or several sub-centers. The second set of measures includes the level of geographical clustering of different income groups within cities for several definitions of local neighborhoods. We find that local employment density (that is, density measured within a 1km radius around the centroid of neighborhoods) has a negative effect on income segregation, meaning that a higher concentration of local employment leads to a higher concentration of individuals in the top income groups in particular areas within cities. We propose that, in a context of high commuting costs, this effect is related to the fact that higher-income individuals are able to out-bid lower income individuals in the competition for proximity to employment, making the areas proximate to employment centers more homogeneous in terms of income composition. The negative effect of local employment density on income segregation is reversed for metropolitan areas displaying a more decentralized employment pattern, with employment concentrating around sub-centers located far apart from the main employment center. These results can inform the design of policies targeting social cohesion and job accessibility in cities of different sizes and levels of development.

Besides the research results, which can inform policy making in metropolitan areas in countries of different levels of development, the project generated several new collaborative links with universities and research centers in Spain, Canada, USA and the UK. The project also contributes to European excellence and European Research Area competitiveness through the creation of long lasting collaborations between researchers in Spain and other countries.

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