A Divergence Statistic for Industrial Localization

In this paper, we propose a statistical index of industrial localization based on Kullback-Leibler divergence. This index is particularly well suited to cases where industrial data is only available at the regional level. Unlike existing regional-level indices, our index can be employed to test the significance of industrial localization relative to a hypothesized reference distribution of probable locations across regions. In addition, one can test relative degrees of localization among industries. Finally, as with all Kullback-Leibler divergence indices, our index can be decomposed into components representing localization at various levels of spatial aggregation.