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Modeling industrial location decisions in U.S. counties

  • Guimaraes, Paulo

    ()

  • Figueiredo, Octávio

    ()

  • Woodward, Douglas

    ()

Given its sound theoretical underpinnings, the Random Utility Maximization-based conditional logit model has been the methodological basis for applied research on industrial location decisions. However, in practice, the implementation of this methodology presents problems. A notable one is the underlying Independence of Irrelevant Alternatives (IIA) assumption. In this paper we show that by taking advantage of an equivalence relation between the likelihood function of the conditional logit model and the Poisson regression [Guimarães, Figueiredo and Woodward (2002)] one can more effectively control for the potential IIA violation resulting from omitted attribute characteristics. We also provide an empirical illustration, wherein we exemplify how that relation can be helpful to investigate the location determinants of new manufacturing plants in the United States counties.

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Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa02p060.

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Date of creation: Aug 2002
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Handle: RePEc:wiw:wiwrsa:ersa02p060
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  1. 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.
  2. 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.
  3. Hanson, Gordon H, 1996. "Localization Economies, Vertical Organization, and Trade," American Economic Review, American Economic Association, vol. 86(5), pages 1266-78, December.
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  6. Timothy J. Bartik, 1991. "Who Benefits from State and Local Economic Development Policies?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number wbsle, March.
  7. Daniel McFadden, 1977. "Modelling the Choice of Residential Location," Cowles Foundation Discussion Papers 477, Cowles Foundation for Research in Economics, Yale University.
  8. 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.
  9. Timothy J. Bartik, 2003. "Local Economic Development Policies," Upjohn Working Papers and Journal Articles 03-91, W.E. Upjohn Institute for Employment Research.
  10. 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.
  11. 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.
  12. 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.
  13. 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.
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  15. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
  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.
  17. 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.
  18. John E. Anderson & Robert W. Wassmer, 2000. "Bidding for Business: The Efficacy of Local Economic Development Incentives in a Metropolitan Area," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number bb, March.
  19. Krugman, Paul, 1998. "What's New about the New Economic Geography?," Oxford Review of Economic Policy, Oxford University Press, vol. 14(2), pages 7-17, Summer.
  20. 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.
  21. 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.
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  23. 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.
  24. Michael Porter, 1994. "The Role of Location in Competition," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 1(1), pages 35-40.
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