Dartboard tests for the location quotient

In this paper we reinterpret the location quotient, the commonly employed measure of regional industrial agglomeration, as an estimator derived from Ellison and Glaeser [Ellison, G., and Glaeser, E., 1997. Geographic concentration in U.S. manufacturing industries: a dartboard approach. Journal of Political Economy 105 (5), 889–927.] dartboard framework. This approach provides a theoretical foundation on which to build statistical tests for the measure. With a simple application, we show that these tests provide valuable information about the accuracy of the location quotient. The tests are relatively easy to implement using regional employment and establishment data.