Firm Location Decisions, Regional Grants and Agglomeration Externalities

Griffith, Rachel; Devereux, Michael P.; Simpson, Helen

doi:10.2139/ssrn.1308573

Download This Paper

Open PDF in Browser

Add Paper to My Library

Firm Location Decisions, Regional Grants and Agglomeration Externalities

Advanced Institute of Management Research Paper No. 038

42 Pages Posted: 29 Nov 2008

See all articles by Rachel Griffith

Rachel Griffith

Institute for Fiscal Studies (IFS); University of Manchester; Centre for Economic Policy Research (CEPR)

Centre for Business Taxation, Oxford University; CESifo (Center for Economic Studies and Ifo Institute); Institute for Fiscal Studies (IFS); Centre for Economic Policy Research (CEPR); University of Oxford - Said Business School; University of Oxford - Said Business School

Helen Simpson

CMPO; Institute for Fiscal Studies (IFS)

Date Written: May 28, 2006

Abstract

We examine whether discretionary government grants influence the location of new plants. Grants have a small effect in attracting plants to specific geographic areas, but their effectiveness increases with agglomeration externalities, measured by the number of other plants in that location in the same industry. We also find evidence that regional industrial structure affects the location of new entrants: firms in more agglomerated industries locate new plants near to others in the same industry, and firms are also attracted to industrially diversified locations. Foreign multinationals locate new plants near to other foreign-owned plants in the same industry.

Suggested Citation: Suggested Citation

Griffith, Rachel and Devereux, Michael P. and Simpson, Helen, Firm Location Decisions, Regional Grants and Agglomeration Externalities (May 28, 2006). Advanced Institute of Management Research Paper No. 038, Available at SSRN: https://ssrn.com/abstract=1308573 or http://dx.doi.org/10.2139/ssrn.1308573