We propose a nonparametric model for global cost minimization as a framework for optimal allocation of a firm's output target across multiple locations, taking account of differences in input prices and technologies across locations. This should be useful for firms planning production sites within a country and for foreign direct investment decisions by multi-national firms. Two illustrative examples are included. The first example considers the production location decision of a manufacturing firm across a number of adjacent states of the US. In the other example, we consider the optimal allocation of US and Canadian automobile manufacturers across the two countries.
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Paper provided by University of Connecticut, Department of Economics in its series Working papers with number
2008-11.
Length: 22 pages Date of creation: Mar 2008 Date of revision: Handle: RePEc:uct:uconnp:2008-11
Note: The authors are grateful to William W. Cooper for insightful comments and suggestions for improvement on an earlier version of the manuscript. Responsibility for errors remains with the authors. Contact details of provider: Postal: University of Connecticut 341 Mansfield Road, Unit 1063 Storrs, CT 06269-1063 Phone: (860) 486-4889 Fax: (860) 486-4463 Web page: http://www.econ.uconn.edu/ More information through EDIRC
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