PROGRESS IN GEOGRAPHY ›› 2006, Vol. 25 ›› Issue (2): 59-69.doi: 10.11820/dlkxjz.2006.02.007

• Original Articles • Previous Articles     Next Articles

A Literature Review on Geographical Concentration of Industries

HE Canfei, LIU Yang   

  1. Department of Urban and Regional Planning, Peking University, Beijing 100871, China
  • Received:2005-12-01 Revised:2006-02-01 Online:2006-03-25 Published:2006-03-25


The geographical concentration of employments and establishments is pervasive. Companies and plants are not distributed uniformly in space, but rather agglomerate in some places. Both location theories and trade theories could be applied to explain the geographical concentration of industries. Classical and neoclassical location theories emphasize the role of transportation costs, labor costs, demand and locational interdependence in promoting spatial clustering of industries. Behavioralists stress the importance of uncertainties, information and knowledge. Strategic perspectives highlight the strategic interactions between related economic agents in locational decisions. Structural location theories relate industrial locations to industrial organization and industrial linkages. In the existing theoretical literature, three broad families of trade models are related to geographic concentration: the neoclassical trade models, new trade models and new economic geography models. In the neoclassical trade theories, the spatial pattern is formed through inter-industry specialization with industries settling in locations with comparative advantages. New trade models are characterized by increasing returns to scale, product differentiation and monopolistic competition. Scale economies provide regions with incentives to specialize even in the absence of differences in their technology or resoure endowments, and make firms to concentrate their production in a few locations. In the new economic geography models, the distribution of economic activities becomes entirely endoenous. Geographic concentration is driven by the interaction of transportation costs and scale economies, which creates demand and cost linkages. Empirical studies on geographical concentration of industries confirm a variety of significant variables including resource endowment, market demand, internal scale economies, external economies, industrial linkages and trade liberalization.

Key words: agglomeration economies, geographical concentration of industries, location theory, trade theory

CLC Number: 

  • K901