Doctoral Dissertation Research in Economics: The Importance of Relocations in U.S. Manufacturing

University Of Rochester, Rochester NY

Investigators

Abstract

Firms move operations to locations that are more favorable for their business. Competition among state and local governments to lure businesses has attracted considerable interest from economists, as well as legislators and policy makers, regarding issues influencing relocation of firms' manufacturing activities. Only a few studies have looked at how manufacturing firms geographically locate their production, and most of them have looked at small samples from manufacturing or small geographic regions. For an initial study, this dissertation research summarizes the patterns of plant relocation and the post-move performance of relocated plants in the U.S. manufacturing industries over the period 1972-1992 using non-publicly available plant and firm level data from the Longitudinal Research Database (LRD) or the Census of Manufactures (CM). Focusing on an individual firm's decision to relocate, this research tabulates and analyzes information on the relocation of firm's manufacturing activities in the following three subprojects. First, the research assesses the relative importance of the relocation across industries and regions by constructing industry level measures of entry, relocation, and exit. The study examines if relocation shows different patterns in plant openings and closings compared to de novo entry and permanent exit. Second, the research studies the characteristics of relocated plants and the decision to relocate. To analyze characteristics of individual firms' geographic shifts of production process, the research focuses on new production facilities for existing firms to produce a product in a new location. Estimation based on econometric models will demonstrate how taxes, unionization, factor prices, ownership, and other geographic and plant specific characteristics affect the relocation decision. Third, the research investigates the impact of geographic shifts on the firms by comparing the growth rates of output and productivity for newly relocated plants to those for existing plants in the original location. The inverse growth-age relation suggested by Jovanovic's (1982) firm-learning model is tested for relocating plants to examine whether the inverse growth-age relation observed among young firms holds also for the relocating plants that start over in a new space.