Firm Location and the Creation and Utilization of Human Capital

Andres Almazan and Adolfo De Motta

No 68, Econometric Society 2004 North American Winter Meetings from Econometric Society

Abstract: This paper presents a theory of location choice that draws on insights from the incomplete contracts and investment flexibility (real option) literatures. We provide conditions under which human capital is more efficiently created and better utilized within industrial clusters that contain similar firms. Our analysis indicates that location choices are influenced by the extent to which training costs are borne by firms versus employees as well as by the uncertainty about future productivity shocks and the ability of firms to increase and decrease the scale of their operations. Extensions of our model allow us to consider, among other things, endogenous technological choices by firms in clusters and how behavioral biases (i.e., managerial overconfidence about their firms' prospects) can affect firms' location choices

Keywords: Location choice; Human Capital; Real Options (search for similar items in EconPapers)
JEL-codes: F1 J6 R3 (search for similar items in EconPapers)
Date: 2004-08-11
New Economics Papers: this item is included in nep-geo
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Persistent link: https://EconPapers.repec.org/RePEc:ecm:nawm04:68

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