Geographic redistribution of US manufacturing and the role of state development policy

Abstract

JEL classification: J23 H25 H73 R58Keywords: Entry Exit Relocation Tax incentive Competition among state and local governments to lure businesses has attracted considerable interest from economists, as well as legislators and policy makers. This paper quantifies the role of plant relocations in the geographic redistribution of manufacturing employment and examines the effectiveness of state development policy. Only a few studies have looked at how manufacturing firms locate their production facilities geographically; they have used either small manufacturing samples or small geographic regions. This paper provides broader evidence of the impact of plant relocations using confidential establishment level data from the US Census Longitudinal Research Database (LRD), covering the full population of manufacturing establishments in the United States over the period from 1972 to 1992. This paper finds a relatively small role for relocation in explaining the disparity of manufacturing employment growth rates across states. Moreover, it finds evidence of very weak effects of incentive programs on plant relocations.

Job Creation, Destruction, and Regional Employment Growth: Evidence from Korean Establishment-level Data

“…In fact, entry and exit rates are highly correlated, suggesting that higher job creation rates due to entry is likely to accompany higher job destruction rates due to exit. While high correlation between entry and exit rates and job creation and destruction rates across regions are well documented in studies from other countries (e.g., Lee, 2008), this study confirms such a relationship between entry and exit also holds in the case of Korea. …”

Locations and relocations: determinants, modelling, and interrelations

“…From an analytical point of view, the distinction is relevant because location decisions are taken on the grounds of incomplete information about the sites and so previous experiences can make a difference. Thus, the opening of new concerns and the relocation of existing concerns are different location processes that should be studied separately (Pellenbarg et al 2002a,b;Mariotti 2005;Lee 2006). From an economic policy point of view, the distinction is worth inspecting given the increasingly large amount of public funds invested in programs aiming to attract new businesses (Lee 2008).…”

“…Thus, the opening of new concerns and the relocation of existing concerns are different location processes that should be studied separately (Pellenbarg et al 2002a,b;Mariotti 2005;Lee 2006). From an economic policy point of view, the distinction is worth inspecting given the increasingly large amount of public funds invested in programs aiming to attract new businesses (Lee 2008). If start-ups and relocations are not influenced by the same factors, for example, public policies that do not take this difference into consideration may not succeed.…”

Analysing and Predicting Micro-Location Patterns of Software Firms

“…This issue is generally referred to as the Modifiable Areal Unit Problem (MAUP), which is defined through a location, a scale and a shape dimension (Manley 2014;Flowerdew 2011;Bluemke et al 2017). The selection of the appropriate level of analysis is therefore crucial, especially in studies which evaluate public policies (Arauzo-Carod & Manjón-Antolín 2012; Lee 2008), and must be based on reasonable and transparent assumptions.…”