The economies of agglomeration relate to the benefits that firms obtain when locating near each other, mainly due to increasing economies of scale and network effects. The literature refers to localization economies in the case where the increasing economies of scale are internal to the industrial sectors, i.e., among the firms belonging to the same sector. The urbanization economies are observed in the case where increasing returns of scale arise out of a specific industrial sector, because of clustering of firms belonging to different sectors in the same area. The fact that the geographic concentration of manufacturing firms is ascribed to different sources and the relevant agglomeration economies operate within different scopes (industrial, geographic and temporal) renders their measurement and impact evaluation a complicate task.
This paper aims to discern the patterns and trends of agglomeration and examine the determinants of spatial concentration (localization) of manufacturing industries in Greece in the period spanning 1993-2006. The current approach is initiated by the work of Rosenthal and Strange (2001). It relies on the calculation and comparative investigation of different geographic concentration metrics, such as the raw geographic concentration index and the Krugman spatial concentration index, for each manufacturing industry, and it relates them with important sectoral characteristics. Specifically, the impact of several factors is tested, including labor market pooling externalities, knowledge spillovers, vertical linkages, scale economies, input sharing externalities, and transport costs.