An Investigation on the Aggregate Behavior of Firm Relocations to New Jersey (1990–1999) and the Underlying Market Elasticities

Abstract

This paper reports the key results of an in depth analysis of ten years worth of data about business relocations to the State of New Jersey. The analyses have focused on the key geographic patterns of business relocations, and an econometric investigation of the role of transportation accessibility on the business relocation process. The estimated models focus on explaining the business relocation behavior, as well as the business relocation flows from the original locations to New Jersey.The first model assumes that the probability of a business relocating to a given location in New Jersey is a function of the combined attraction to the economic poles of New York City and Philadelphia. The results obtained suggest the existence of two opposing trends concerning the role played by New York City. The discrete choice models estimated provide additional insights into the role of transportation accessibility, suggesting that the type of economic activity performed by the firm shapes the firm's valuation of accessibility to markets.The paper also studied the role of transportation accessibility as an explanatory variable of the business relocation flows by means of estimating aggregate demand models and destination constrained gravity models. In all cases the authors were able to estimate statistically significant and conceptually valid models that explain the aggregate behavior of the variables under study. These models were estimated for both the total number of relocations (all firms) as well as the major industry types. The resulting models were used to compute the elasticities with respect to accessibility variables. The chief conclusion is that different industry types exhibit different elasticities.In order to do the computations for the elasticities of the gravity model, the authors developed a mathematical formulation. Simply stated, this formulation demonstrates that the elasticity of the spatial interaction between an origin i and a destination j is simply the summation of the elasticities at the production end, and at the destination. The market elasticity is then computed as the weighted average of the elasticities for each of the market segments.

Regional business climate and interstate manufacturing relocation decisions

“…Empirically, studies of neo-classical relocation determinants focus on labor and transportation costs, market size, agglomeration economies and other, mostly regional, characteristics. The evidence suggests that companies are attracted by agglomerations (Erickson & Wasylenko, 1980;Figueiredo, Guimarães, & Woodward, 2002;Giuliano, 1989;Strauss-Kahn & Vives, 2009), labor force availability (Erickson & Wasylenko, 1980;Giuliano, 1989;Schmitt, Gleason, Pigozzi, & Marcus, 1987), and access to transportation networks (Holguin-Veras et al, 2005;Ozmen-Ertekin, Ozbay, & Holguin-Veras, 2007).…”

“…Based on the current state of the literature one can conclude that taxes have a negative, although weak, effect on economic activity giving some credence to the notion that high taxes deteriorate business climate. Yet, taxes pay for public education, which is vital to the productivity of the workforce, and for the transportation infrastructure that is an important consideration in business relocation decisions (Holguin-Veras et al, 2005;Ozmen-Ertekin et al, 2007). We expect education expenditures to have a positive impact on migration as improvements in human capital can have utility to a variety of firms.…”

Ties that Spatially Bind? A Relational Account of the Causes of Spatial Firm Mobility

“…The causes of firm relocation have been studied extensively from a geographical point of view. Four groups of factors, which incorporate the most commonly found determinants of Brouwer et al, 2004;Van Dijk & Pellenbarg, 2000;Holguin-Veras et al, 2005;Holl, 2004;Van Steen, 1998), are included in this research. These groups of factors are: firm internal characteristics, characteristics of the building, characteristics of the site, and characteristics of the region.…”

The Rise of Border Areas in an Integrated Region of China

“…In addition, intra-border integration has also led to the prosperity of border areas between two states within one country. For example, because of lower taxes and other incentives, border counties in New Jersey have benefited from the relocation of large numbers of firms from New York City and Philadelphia [21]. In China, provincial border regions inside two highly integrated regions, the Yangtze River Delta and Beijing-Tianjin-Hebei, have also been identified as growing more rapidly than other regions [22].…”

“…This study complemented existing research as follows: (i) We took the Pearl River Delta in China as an example, providing a practical example in developing countries for the growth of border areas in integrated regions with the same regime; (ii) Most prior studies on border areas failed to define the specific scope of the boundary, and used qualitative methods to measure the growth of border areas, including the emergence of new functional nodes in the border areas [16], enterprise agglomeration [20,21], and population agglomeration [17]. We specifically defined the geographical extent of the border areas, and used data such as night-time light (NTL) to provide a quantitative measure of growth in the border areas.…”