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.
