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Modeling industrial location decisions in U.S. counties

  • Octavio Figueiredo

    ()

    (University of Porto, CEMPRE)

  • Paulo Guimaraes

    ()

    (Universidade do Minho, NIMA)

  • Douglas Woodward

    ()

    (University of South Carolina)

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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Paper provided by Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho in its series NIMA Working Papers with number 18.

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Length: 36 pages
Date of creation: Apr 2002
Date of revision:
Handle: RePEc:nim:nimawp:18/2002
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  8. Paulo Guimar�es & Octávio Figueirdo & Douglas Woodward, 2003. "A Tractable Approach to the Firm Location Decision Problem," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 201-204, February.
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  12. 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.
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  18. Paulo Guimaraes & Robert J. Rolfe & Douglas P. Woodward, 1998. "Regional Incentives and Industrial Location in Puerto Rico," International Regional Science Review, , vol. 21(2), pages 119-138, August.
  19. Levinson, Arik, 1996. "Environmental regulations and manufacturers' location choices: Evidence from the Census of Manufactures," Journal of Public Economics, Elsevier, vol. 62(1-2), pages 5-29, October.
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