ABSTRACT
In line with the views of Marshall (1890), recent publications have empirically studied the tendency for industry firms to cluster around similar firms. In this chapter, we attempt to broaden the temporal and geographic scope of existing studies on co-location, by applying the point-pattern methodology of Duranton and Overman (2005, 2008) on samples of individual firms in China (Hunan province) in 1954 and 2004 and the Netherlands in 1896 and 2010. By comparing co-location across these samples, we can test to what extent agglomeration decreased over time and what the role of transportation costs was in this process. We find evidence for a process of dispersion over all sectors. Nonetheless, there are large differences among the sectors: the effect of dispersion was notably lower in those sectors with the lowest economies of scale, a process further aided by the decline in transportation costs. In the Netherlands, this dispersion process was caused by the shift of the location of factories from railroad and waterway facilities to the increasingly important road facilities, thanks to the decline in vehicle transport costs over the twentieth century. Although in China we find a similar process, this process was significantly altered by government intervention and relatively high indirect transportation costs.
