Comparing Location Decisions of Domestic and Foreign Auto Supplier Plants

Abstract

Plant locations in the U.S. auto industry have been moving southward for some time now. This paper utilizes a comprehensive dataset of the U.S. auto industry and focuses on plant location decisions of auto supplier plants that were opened less than 15 years ago in the U.S. We find that agglomeration continues to matter: suppliers want to be close to each other as well as to their assembly plant customers. We also find evidence of differences in location factors for domestic and foreign suppliers. Foreign suppliers exhibit a stronger preference to be near highways, other foreign suppliers and foreign assembly plants. That helps explain the different location patterns observed for these two groups within the auto region.

Keywords: Auto supplier industry, plant locations, agglomeration

JEL Classification: R12, R30, L62