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A tractable approach to the firm location decision problem

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

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Abstract

The Random Utility Maximization-based conditional logit model has provided an adequate framework to model firm location decisions. However, in practice, the implementation of this methodology presents problems when one has to handle complex choice scenarios with a large number of spatial alternatives. Another weakness of the logit approach is the underlying Independence to Irrelevant Alternatives (IIA) assumption. In this paper, we posit the Poisson regression as a tractable solution to these problems. Actually, the coefficients of the conditional logit model can be equivalently estimated using a Poisson regression. Moreover, by applying the fixed effects Poisson model one can easily and more effectively control for some forms of the potential IIA violations.

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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 2.

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Length: 13 pages
Date of creation: May 2000
Date of revision:
Handle: RePEc:nim:nimawp:2/2000

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Postal: Universidade do Minho, Escola de Economia e Gestão Gualtar, 4710-057 Braga,Portugal
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  6. 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!]
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  8. Chen, George Shih-Ku, 2009. "Agglomeration economies and the location of Taiwanese investment in China," MPRA Paper 13896, University Library of Munich, Germany. [Downloadable!]
  9. Bertrand, Olivier & Mucchielli, Jean-Louis & Zitouna, Habib, 2004. "Location Choices of Multinational Firms: The Case of Mergers and Acquisitions," Discussion Paper Series 26170, Hamburg Institute of International Economics. [Downloadable!]
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  10. Paulo Guimarães & Octávio Figueiredo & Douglas Woodward, 2004. "Location Modelling and the Localization of Portuguese Manufacturing Industries," ERSA conference papers ersa04p28, European Regional Science Association. [Downloadable!]
  11. Nicolas Coeurdacier & Roberto A. De Santis & Antonin Aviat, 2009. "Cross-Border Mergers and Acquisitions: Financial and Institutional Forces," Working Paper Series 1018, European Central Bank. [Downloadable!]
  12. 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!]
  13. Rosa Forte, 2004. "The relationship between foreign direct investment and international trade. Substitution or complementarity? A survey," FEP Working Papers 140, Universidade do Porto, Faculdade de Economia do Porto. [Downloadable!]
  14. Fabrice Defever, 2006. "Functional fragmentation and the location of multinational firms in the enlarged Europe," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00118808_v1, HAL. [Downloadable!]
  15. 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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  16. J Vernon Henderson & James Davis, 2004. "The Agglomeration of Headquarters," Working Papers 04-02, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
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  18. Mohammad Arzaghi, 2005. "Quality Sorting and Networking: Evidence from the Advertising Agency Industry," Working Papers 05-16, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
  19. Paulo Guimarães & Octávio Figueiredo & Douglas Woodward, 2004. "Measuring the Localization of Economic Activity: A Random Utility Approach," FEP Working Papers 161, Universidade do Porto, Faculdade de Economia do Porto. [Downloadable!]
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  21. Josep Maria Arauzo Carod, . "Determinants of industrial location. An application for Catalan municipalities," Studies on the Spanish Economy 138, FEDEA. [Downloadable!]
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  22. 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!]
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