Working Paper: NBER ID: w4767
Authors: Keith Head; John Ries; Deborah Swenson
Abstract: Recent theories of economic geography suggest that firms in the same industry may be drawn to the same locations because proximity generates positive externalities or 'agglomeration effects.' Under this view, chance events and government inducements can have a lasting influence on the geographical pattern of manufacturing. However, most evidence on the causes and magnitude of industry localization has been based on stories, rather than statistics. This paper examines the location choices of 751 Japanese manufacturing plants built in the U.S. since 1980. Conditional logit estimates support the hypothesis that industry-level agglomeration benefits play an important role in location decisions.
Keywords: agglomeration; location choice; Japanese manufacturing; foreign direct investment
JEL Codes: F23; R12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Agglomeration benefits from proximity to other firms (R32) | Attractiveness of a state for investment (F21) |
| Initial investments by Japanese firms (F23) | Subsequent investments in the same industry within the same states (L69) |
| Industrial activity in neighboring states (L79) | Attractiveness of a state for investment (F21) |