Modeling industrial location decisions in U.S. counties

Octávio Figueiredo, Paulo Guimaraes and Douglas Woodward ()

No 18, NIMA Working Papers from Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho

Abstract: 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.

JEL-codes: C25 R12 R39 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2002-04
New Economics Papers: this item is included in nep-dcm
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Citations: View citations in EconPapers (15)

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Working Paper: Modeling industrial location decisions in U.S. counties (2002)
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