To what extent do New Zealand firms choose to locate close to each other, and why?
This paper summarises patterns of geographic concentration of firms in New Zealand between 1987 and 2003. We present a range of summary measures of own-industry concentration, and examine between-industry co-location.
Overall, New Zealand employment is relatively highly concentrated, although only around 30 percent of employment is in highly concentrated industries. Around 60 percent of employment is in industries that are spread more or less in proportion to total employment. Geographic concentration across 58 Labour Market Areas (LMAs) has increased over the past 18 years, although industries have become more dispersed within LMAs.
We find little evidence of a causal effect of geographic concentration of industries, or of diversity of local industry structure on employment growth or job flow rates. Rates of job creation, job destruction, and net employment growth are higher for industries that are more geographically concentrated, but the relationship disappears when we control for area and industry fixed effects. This suggests that it is not the concentration per se that is driving the high flows and employment growth, but other unobserved characteristics of areas and industries.