Incentives and Firm Migration: An Interstate Comparison Approach

Abstract

The authors model how state business incentives influence interstate relocation patterns of manufacturers using a panel (2000-2011) of 32 states. The National Establishment Time Series database and the Panel Database on Incentives and Taxes are used to study relocation by manufacturing establishments based on differences between the origin and destination states. The authors find that traditional factors associated with business climate, such as taxation and subsidies, statistically influence manufacturing interstate relocation. Further analysis shows that policy changes (e.g., increasing incentives and reducing taxes) to induce manufacturers to relocate may need to be infeasibly large or used in combination to evoke an economically meaningful increase in relocations.

Digital gravity? Firm birth and relocation patterns of young digital firms in Germany

“…In contrast to the assumptions of a choice model firms are assumed to have greater knowledge about geographically closer markets and locations. In the firm mobility literature, Conroy et al (2016) and Pan et al (2020) use a gravity‐like model, albeit without considering the key determinant of the gravity model—the distance. Pan et al (2020), however, suggest its usage for future studies.…”

“…In the firm mobility literature, Conroy et al (2016) and Pan et al (2020) use a gravity‐like model, albeit without considering the key determinant of the gravity model—the distance. Pan et al (2020), however, suggest its usage for future studies. Hence, this paper is the first to analyze firms' relocation explicitly modelling the costs using distance as a proxy.…”

What makes German manufacturing plants move locations?

“…Pan et al. ( 2020 ) analyze the relocation choices of firms in the USA and find that taxes and subsidies are important influential factors. Manjon-Antolin and Arauzo-Carod ( 2011 ) investigate the determinants of location and relocation decisions made by establishments across the constituent municipalities of Catalunya.…”

“… 2016 ; Pan et al. 2020 ) for the relocation choices of firms. The impact of structural funding on firm relocation choices is not yet well explored: the previous literature has focused mainly on the macroeconomic impacts of such funding, such as regions’ GDP or regional employment, rather than firm relocation choices, which is likely to be due to lower data availability.…”

“…Conroy et al (2017) find a link between higher wages and positive relocation decisions taken by firms in the US; they explain that this might be due to the decline in low-skilled manufacturing and the rise of high-tech manufacturing and reason that higher wages might indicate that highly-skilled labor is employed. Pan et al (2020) analyze the relocation choices of firms in the USA and find that taxes and subsidies are important influential factors. Manjon-Antolin and Arauzo-Carod (2011) investigate the determinants of location and relocation decisions made by establishments across the constituent municipalities of Catalunya.…”