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Modeling industrial location decisions in U.S. counties

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Author Info
Octavio Figueiredo () (University of Porto, CEMPRE)
Paulo Guimaraes () (NIMA, Universidade do Minho)
Douglas Woodward () (University of South Carolina)

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Abstract

Given its sound theoretical underpinnings, the RandomUtilityMaximizationbased conditional logit model (CLM) serves as the principal method for applied research on industrial location decisions. Studies that implemented this methodology, however, had to confront the underlying Independence of Irrelevant Alternatives (IIA) assumption and were unable to fully accommodate this problem. This paper shows that by taking advantage of an equivalent relation between the CLM and Poisson regression likelihood functions one can more e.ectively control for the potential IIA violation in complex choice scenarios where the decision-maker confronts a large number of spatial alternatives. The paper also provides an illustration, demonstrating the advantages of this relation in investigation of location determinants of new manufacturing plant births in the U.S. counties.

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File URL: http://nima.eeg.uminho.pt/publications/128.pdf
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Publisher Info
Paper provided by Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho in its series Working Papers with number 18.

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Length: 36 pages
Date of creation: Apr 2002
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Handle: RePEc:nim:nimawp:18/2002

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Postal: Universidade do Minho, Escola de Economia e Gestão Gualtar, 4710-057 Braga,Portugal
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Find related papers by JEL classification:
C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models
R12 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
R39 - Urban, Rural, and Regional Economics - - Production Analysis and Firm Location - - - Other

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Guimaraes, Paulo & Figueiredo, Octavio & Woodward, Douglas, 2000. "Agglomeration and the Location of Foreign Direct Investment in Portugal," Journal of Urban Economics, Elsevier, vol. 47(1), pages 115-135, January. [Downloadable!] (restricted)
  2. Bartik, Timothy J, 1985. "Business Location Decisions in the United States: Estimates of the Effects of Unionization, Taxes, and Other Characteristics of States," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(1), pages 14-22, January.
  3. Figueiredo, Octavio & Guimaraes, Paulo & Woodward, Douglas, 2002. "Home-field advantage: location decisions of Portuguese entrepreneurs," Journal of Urban Economics, Elsevier, vol. 52(2), pages 341-361, September. [Downloadable!] (restricted)
  4. Fulong Wu, 1999. "Intrametropolitan FDI firm location in Guangzhou, China A Poisson and negative binomial analysis," The Annals of Regional Science, Springer, vol. 33(4), pages 535-555. [Downloadable!] (restricted)
  5. Paulo Guimaraes & Octavio Figueiredo & Douglas Woodward, 2000. "A tractable approach to the firm location decision problem," Working Papers 2, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho. [Downloadable!]
    Other versions:
  6. Head, Keith & Ries, John & Swenson, Deborah, 1995. "Agglomeration benefits and location choice: Evidence from Japanese manufacturing investments in the United States," Journal of International Economics, Elsevier, vol. 38(3-4), pages 223-247, May. [Downloadable!] (restricted)
    Other versions:
  7. List, John A., 2001. "US county-level determinants of inbound FDI: evidence from a two-step modified count data model," International Journal of Industrial Organization, Elsevier, vol. 19(6), pages 953-973, May. [Downloadable!] (restricted)
  8. Coughlin, Cletus C & Terza, Joseph V & Arromdee, Vachira, 1991. "State Characteristics and the Location of Foreign Direct Investment within the United States," The Review of Economics and Statistics, MIT Press, vol. 73(4), pages 675-83, November. [Downloadable!] (restricted)
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  10. Cletus C. Coughlin & Eran Segev, 2000. "Location Determinants of New Foreign-Owned Manufacturing Plants," Journal of Regional Science, Blackwell Publishing, vol. 40(2), pages 323-351. [Downloadable!] (restricted)
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  11. Hansen, Eric R., 1987. "Industrial location choice in Sao Paulo, Brazil : A nested logit model," Regional Science and Urban Economics, Elsevier, vol. 17(1), pages 89-108, February. [Downloadable!] (restricted)
  12. Daniel McFadden & Kenneth Train, 2000. "Mixed MNL models for discrete response," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(5), pages 447-470. [Downloadable!]
  13. Carlton, Dennis W, 1983. "The Location and Employment Choices of New Firms: An Econometric Model with Discrete and Continuous Endogenous Variables," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 440-49, August. [Downloadable!] (restricted)
  14. Martin, Ron, 1999. "The New 'Geographical Turn' in Economics: Some Critical Reflections," Cambridge Journal of Economics, Oxford University Press, vol. 23(1), pages 65-91, January.
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  16. Head, C. Keith & Ries, John C. & Swenson, Deborah L., 1999. "Attracting foreign manufacturing: Investment promotion and agglomeration," Regional Science and Urban Economics, Elsevier, vol. 29(2), pages 197-218, March. [Downloadable!] (restricted)
  17. Venables, Anthony J, 1996. "Localization of Industry and Trade Performance," Oxford Review of Economic Policy, Oxford University Press, vol. 12(3), pages 52-60, Autumn.
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  19. Timothy J. Bartik, 2003. "Local Economic Development Policies," Staff Working Papers 03-91, W.E. Upjohn Institute for Employment Research. [Downloadable!] (restricted)
  20. Daniel McFadden, 1977. "Modelling the Choice of Residential Location," Cowles Foundation Discussion Papers 477, Cowles Foundation, Yale University. [Downloadable!]
  21. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Elisabet Viladecans Marsal & Josep Maria Arauzo Carod, . "Industrial Location at the Intra-metropolitan Level: A Negative Binomial Approach," Studies on the Spanish Economy 224, FEDEA. [Downloadable!]
    Other versions:
  2. Frances Ruane & Xiaoheng Zhang, 2007. "Location Choices of the Pharmaceutical Industry in Europe after 1992," The Institute for International Integration Studies Discussion Paper Series iiisdp220, IIIS. [Downloadable!]
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