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Determinants of Industrial Location Choice in India: A Polychoric Principal Component Analysis Approach

Author

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  • Nalin Kumar Ramaul

    (Government College)

  • Pinki Ramaul

    (Trivenee School of Excellence)

Abstract

This research paper attempts to identify the factors determining industrial location choice in India, which is essential for formulation of an effective industrial location policy. There are two broad approaches to identify the determinants of firms’ location decisions. One is ‘Modelling’ approach or ‘Revealed Preference’ approach or an econometric analysis of empirical patterns to identify revealed preference based on the characteristics of the region. The second approach is the ‘Stated Preference’ (or Industrial Location Survey) approach. Survey research typically identifies one or more key respondents and asks them about the factors, which influenced their location decision choice. The present research paper is based on the Industrial Location Survey approach. It attempts to analyse the primary survey data collected in the solicited research study sponsored by the Planning Commission, Government of India. The primary study consisted of a sample survey in the Special Category States or the Beneficiary States viz. Jammu and Kashmir, Himachal Pradesh and Uttarakhand; and the Control Group or the Non-Beneficiary Neighbouring States viz. Haryana, Punjab and Uttar Pradesh. The data from the questions concerning importance of location factors was derived using Likert rating scale. The Polychoric Principal Component Analysis is used to identify the key factors in industrial location. The analysis validates the importance of fiscal incentives in industrial location.

Suggested Citation

  • Nalin Kumar Ramaul & Pinki Ramaul, 2016. "Determinants of Industrial Location Choice in India: A Polychoric Principal Component Analysis Approach," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 14(1), pages 29-56, June.
    • Handle: RePEc:spr:jqecon:v:14:y:2016:i:1:d:10.1007_s40953-015-0026-z
    DOI: 10.1007/s40953-015-0026-z
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    Cited by:

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    2. Champagne, Marie-Pier & Dubé, Jean, 2023. "The impact of transport infrastructure on firms’ location decision: A meta-analysis based on a systematic literature review," Transport Policy, Elsevier, vol. 131(C), pages 139-155.
    3. Ahmad Mohd Khalid, 2022. "Developmental Success and the Sustainability Challenge in a Mountain Region: Case of Himachal Pradesh in India," International Journal of Regional Development, Macrothink Institute, vol. 9(1), pages 1-47, December.
    4. Salvatore Ercolano & Giuseppe Lucio Gaeta & Benedetta Parenti, 2017. "Individual motivations and thematically-oriented film festival attendance: an empirical study based on spectators of the Artecinema international documentary festival in Naples (Italy)," Quality & Quantity: International Journal of Methodology, Springer, vol. 51(2), pages 709-727, March.

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    More about this item

    Keywords

    Industrial location; Location factors; Regional incentives; Special category states in India; Principal component analysis; Polychoric correlation;
    All these keywords.

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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