Assessing the localization pattern of German manufacturing and service industries: a distance-based approach

This paper assesses the agglomeration pattern of four-digit industries in Germany using a rich data set on the population of German firms. To identify geographical agglomeration, the distance-based approach of Duranton and Overman of 2005 is followed. It is found that the location pattern of 71% of the manufacturing industries departs from randomness in the sense that plants exhibit significant geographical localization. In line with previous studies for the United Kingdom and France, the analysis suggests that especially traditional manufacturing industries exhibit strong localization patterns. Moreover, it is found that geographical localization is not restricted to the manufacturing sector, but that it plays an equally important role for service industries.