Firm's Evaluation of Location Quality: Evidence from East Germany

38 Pages Posted: 20 Aug 2015

See all articles by Alexander Friedrich Eickelpasch

Alexander Friedrich Eickelpasch

German Institute for Economic Research (DIW Berlin)

Georg Hirte

Technische Universität Dresden Institute of Transport & Economics

Andreas Stephan

DIW Berlin, German Institute for Economic Research

Date Written: July 2015

Abstract

Our study provides evidence for firms' evaluation of location quality. We use a 2004 survey of 6,000 East German firms that contained questions on the importance and assessment of 15 different location factors ranging from closeness to customers and suppliers, transport infrastructure, and proximity to research institutions and universities, as well as questions about the local financial institutions and region's “image”. The results show (1) a great deal of heterogeneity in terms of which firm- or regional-level characteristics are important in the evaluation of a specific location factor, (2) that the model's explanatory power is, overall, low and thus neither location characteristics nor internal factors are fully reflected in the perceptions, (3) that a firm's business situation and whether a location factor is considered important have explanatory power for perception. One policy-relevant conclusion that we derive from these findings is that location policy should consider firms' perception of a specific location in addition to improving the actual attributes of that location.

Keywords: Location Factors, Multi-Equation System, Perception Bias, Survey Data

JEL Classification: R3, R12, L2

Suggested Citation

Eickelpasch, Alexander Friedrich and Hirte, Georg and Stephan, Andreas, Firm's Evaluation of Location Quality: Evidence from East Germany (July 2015). DIW Berlin Discussion Paper No. 1497, Available at SSRN: https://ssrn.com/abstract=2647237 or http://dx.doi.org/10.2139/ssrn.2647237

Alexander Friedrich Eickelpasch

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany
+49 30 89 789 680 (Phone)
+49 30 89 789 104 (Fax)

HOME PAGE: http://www.diw.de

Georg Hirte

Technische Universität Dresden Institute of Transport & Economics ( email )

Würzburger Str. 35
Dresden, 01062
Germany

Andreas Stephan (Contact Author)

DIW Berlin, German Institute for Economic Research ( email )

Mohrenstraße 58
Berlin, 10117
Germany

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