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Industrial Location Modeling: Extending the Random Utility Framework

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Author Info
Paulo Guimaraes
Octávio Figueiredo
Douglas Woodward

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Abstract

Given sound theoretical underpinnings, the random utility maximization-based conditional logit model (CLM) serves as the principal method for applied research on industrial location decisions. Studies that implement this methodology, however, confront several problems, notably the disadvantages of the underlying Independence of Irrelevant Alternatives (IIA) assumption. This paper shows that by taking advantage of an equivalent relation between the CLM and Poisson regression likelihood functions one can more effectively control for the potential IIA violation in complex choice scenarios where the decision maker confronts a large number of narrowly defined spatial alternatives. As demonstrated here our approach to the IIA problem is compliant with the random utility (profit) maximization framework. Copyright Blackwell Publishers, 2004

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Publisher Info
Article provided by Blackwell Publishing in its journal Journal of Regional Science.

Volume (Year): 44 (2004)
Issue (Month): 1 ()
Pages: 1-20
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Handle: RePEc:bla:jregsc:v:44:y:2004:i:1:p:1-20

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  1. Jason P. Brown & Raymond J.G.M. Florax & Kevin T. McNamara, 2008. "Evolution Of Investment Flows In U.S. Manufacturing:A Spatial Panel Approach," Working Papers 08-06, Purdue University, College of Agriculture, Department of Agricultural Economics. [Downloadable!]
  2. Lisa De Propris & Nigel Driffield & Stefano Menghinello, 2005. "local industrial systems and the location of FDI in Italy," International Journal of the Economics of Business, Taylor and Francis Journals, vol. 12(1), pages 105-121, February. [Downloadable!] (restricted)
  3. Gilles Duranton & Laurent Gobillon & Henry G Overman, 2006. "Assessing the effects of local taxation using microgeographic data," Working Papers tecipa-247, University of Toronto, Department of Economics. [Downloadable!]
    Other versions:
  4. Marius Brülhart & Mario Jametti & Kurt Schmidheiny, 2007. "Do Agglomeration Economies Reduce the Sensitivity of Firm Location to Tax Differentials?," Economics Working Papers 1062, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
    Other versions:
  5. Ángel Alañón & Rafael Myro, . "Does neighboring "industrial atmosphere" matter in industrial location?. Empirical evidence from Spanish municipalities," Studies on the Spanish Economy 199, FEDEA. [Downloadable!]
  6. Hilber, Christian A. L. & Voicu, Ioan, 2007. "Agglomeration Economies and the Location of Foreign Direct Investment: Empirical Evidence from Romania," MPRA Paper 5137, University Library of Munich, Germany. [Downloadable!]
  7. Miguel C. Manjon-Antolin & Josep Maria Arauzo-Carod, 2006. "Locations and Relocations: Modelling, Determinants, and Interrelations," ERSA conference papers ersa06p33, European Regional Science Association. [Downloadable!]
  8. Davis, David E. & Schluter, Gerald E., 2005. "Labor-Force Heterogeneity as a Source of Agglomeration Economies in an Empirical Analysis of County-Level Determinants of Food Plant Entry," MPRA Paper 6654, University Library of Munich, Germany. [Downloadable!]
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  9. Lutz Schneider & Alexander Kubis, 2009. "Are there Gender-specific Preferences for Location Factors? A Grouped Conditional Logit-Model of Interregional Migration Flows in Germany," IWH Discussion Papers 5-09, Halle Institute for Economic Research. [Downloadable!]
  10. Pruitt, J. Ross & Tilley, Daniel S., 2008. "Location Patterns of Confectionery Manufacturers in a Post NAFTA Environment," 2008 Annual Meeting, February 2-6, 2008, Dallas, Texas 6802, Southern Agricultural Economics Association. [Downloadable!]
  11. Jordi Jofre Monseny & Alberto Sole Olle, 2007. "Tax Differentials and Agglomeration Economies in Intraregional Firm Location," Working Papers in Economics 180, Universitat de Barcelona. Espai de Recerca en Economia. [Downloadable!]
  12. Angel Alañón & Josep Maria Arauzo Carod, . "Accessibility and Industrial Location. Some Evidence from Spain," Studies on the Spanish Economy 214, FEDEA. [Downloadable!]
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