A Treatise on the Geographical Scale of Agglomeration Externalities and the Modifiable Areal Unit Problem

The modifiable areal unit problem (MAUP) refers to the sensitivity of statistical research results to the initial spatial nomenclature used. Despite a substantial literature in the related field of geography on the potential influence of the MAUP, the urban economic modeling tradition has not paid much attention to this issue. In this article, we test to what extent the MAUP moderates the effect of agglomeration externalities on areal sectoral employment growth by varying the initial geographical scale of analysis. Using spatial cross-regressive modeling in which we account for spatial spillover effects of agglomeration externalities, we find different effects of agglomeration forces across geographical scales. As the MAUP is a theoretical as well as a methodological problem, research should not only work with proper statistical specifications of spatial agglomeration models incorporating different geographical scales, but also relate this more explicitly to hypotheses concerning the geographical scale at which agglomeration externalities operate.