SMU ECONOMICS & STATISTICS WORKING PAPER SERIES Paper No. 02-2009
We construct an axiomatic index of spatial concentration around a center or capital point of interest, a concept with wide applicability from urban economics, economic geography and trade, to political economy and industrial organization. We propose basic axioms (decomposability and monotonicity) and renement axioms (order preservation, convexity, and local monotonicity) for how the index should respond to changes in the underlying distribution. We obtain a unique class of functions satisfying all these properties, defined over any n-dimensional Euclidian space: the sum of a decreasing, isoelastic function of individual distances to the capital point of interest, with specifc boundaries for the elasticity coecient that depend on n. We apply our index to measure the concentration of population around capital cities across countries and US states, and also in US metropolitan areas. We show its advantages over alternative measures, and explore its correlations with many economic and political variables of interest.