【正文】 The scope of agglomeration economies: Evidence fromCatalonia*Jordi JofreMonseny11Universitat de Barcelona amp。 Institut d’Economia de Barcelona, Dpt. D’Economia Pol237。tica i Hisenda Pblica, Avda.Diagonal 690, Torre 4, Planta 2a, 08034 Barcelona, Spain ( )Received: 14 January 2020 / Accepted: 28 October 2020Abstract. This paper is an empirical study of the geographic and industrial scope of agglomeration economies. We also explore if small establishments make better neighbours than theirlarger counterparts. We address these issues by studying the effects of local industrial characteristics on the location decisions of new establishments using the random profit maximizationframework. We carry out separate econometric estimations for seven industries in Catalonia, aSpanish region, using data from 1995–2020. Agglomeration economies seem to work at a verylocal level. Evidence of localization, urbanization and diversity effects is found. There isno strong evidence that establishments prefer to be located near to small rather than largeestablishments.JEL classification: L25, R30Key words: Agglomeration economies, firm location, conditional logit, Poisson regression1 IntroductionExternal effects exist when the economic scale of a firm’s geographical location enhances itsproductivity (Rosenthal and Strange 2020). There is a substantial body of literature on thequestion of why firms colocate in space and how this colocalization results in productivitydifferences across firms in different locations.1The existence of these external scale effects hasimportant policy implications. A good understanding of these phenomena can help to designpolicies aimed at fostering the development of particular industries at the local and regional leveland guiding more general policies for local and regional growth.The empirical literature on agglomeration economies is substantial.2A great deal of thisliterature has focused on whether specialized economic environments (localization/MarshallArrowRomer externalities) or large and diversified cities (urbanization/Jacobs diversity effects)* The author acknowledges financial support from SEJ202065086 and 2020SGR002851See Duranton and Puga (2020) for an extensive review.2See Rosenthal and Strange (2020) for an extensive review.doi:169。 2020 the author(s). Journal pilation 169。 2020 RSAI. Published by Blackwell Publishing, 9600 Garsington Road,Oxford OX4 2DQ, UK and 350 Main Street, Malden MA 02148, USA.Papers in Regional Science, Volume 88 Number 3 August 2020.generate larger scale effects. Empirical studies have yielded diverse results. Hence, this questionremains unsolved. Much less applied work has analysed the geographic scope of these externaleffects. Since data at a geographically detailed level were not available until recently, very fewpapers have focused on the geographic scope of agglomeration economies. Rosenthal andStrange (2020) is the first paper that uses US zip code data to analyse this question carefully. Athird question that has not received much attention in the literature is whether the local industrialorganization matters, ., are external effects larger in an environment made up of small firmsthan in a site where there are a few large firms? This paper aims to shed some extra light on thesethree topics by looking at location decisions of new and relocating establishments acrossmunicipalities in Catalonia, a region in Spain.We first study the geographic scope of agglomeration economies by paring how new andrelocating establishments value the industry characteristics of one municipality in parison tothe industry characteristics of the municipalities contained in two different concentric rings fromthis municipality. Data from Catalonia is very well suited to analyse this issue given the reducedsize of its municipalities. The average size of Catalan municipalities is 34 Km2which is 1/6 ofthe average size of the US zip codes analysed in Rosenthal and Strange (2020). Second, westudy how new and relocating establishments value local employment in the same industry (.,localization economies) pared to local employment in a different industry (., urbanizationeconomies). Third, we analyse if more diverse economic environments attract new and relocating establishments. Finally, we explore if new and relocating establishments prefer localemployment to be in small or in large establishments.The establishments that we study constitute the universe of new and relocating establishments that settled down between 1996 and 2020 in the following 7 industries: Textiles, Woodand furniture, Chemical products, Fabricated metals except for machinery, Motor vehicles,Radio, television and munication equipment, and Medical, precision and optical instruments. For each industry we run a separate regression. ViladecansMarsal (2020) has previouslyanalysed the role of agglomeration economies in industrial location at the Spanish municipallevel. However, her analysis is undertaken with data for a single year drawn from fiscaldatabases. There are two main limitations to using such databases. First, they only includemunicipalities with a population exceeding 15,000, when the average population of Spanishmunicipalities is 5,000. Second, estimating the external effects with crosssection data onaggregate employment is problematic, given the difficulties in identifying structural parametersfrom employment demand equations.Rosenthal and Strange (2020) study the impact of preexisting local industrial characteristicson the number and employment of firm births controlling for metropolitan area fixed effects.They use the Tobit model to deal with the fact that a very high share of zip codes does not recordany births for a given year. However, the Tobit approach presents three limitations in thiscontext. First,