Abstract
The connection between intra-industry proximity effects and industry localisation has been considered unproblematic. Industry localisation has been treated as an indicator of Marshallian proximity effects. However, this paper argues that localisation is an effect also of urbanisation effects. To identify intra- industry agglomeration, localisation therefore must be separated into two components of concentration and urbanisation. The paper proposes the Q function, a measure based on Ripley’s K function, as a way of achieving this. The Q function has an intuitive interpretation directly relevant for proximity effects. When applied to 30 industries in Sweden, the Q function reveals patterns of concentration and urbanisation, which with traditional localisation measures will be confounded and indistinguishable. The analysis also suggests that using the whole manufacturing sector as the reference distribution will give biased results when measuring localisation.