Modeling industrial location decisions in U.S. counties

idence that agglomeration economies (both urbanization and localization)
are relevant factors for explaining location decisions across U.S. counties.
Apparently, urbanization economies have a higher impact. Similar evidence
about the positive impact of agglomeration economies on interregional and
interurban location was found by Carlton (1983), Bartik (1985), Hansen
(1987), Levinson (1996)and Figueiredo, Guimaraes & Woodward (2002).

When controlling for ”county specific-effects” we also find strong evi-
dence that higher property taxes deter investments across U.S. counties.
Property taxes in the United States remain a controversial policy issue.
While it is often argued that local tax policy is relevant for location deci-
sions, empirical studies have failed to produce strong, consistent evidence.
The property tax was tested in various studies of location by foreign investors
[Woodward (1992), Coughlin & Segev (2000)and List (2001)] but these stud-
ies were unable to found a significant relationship. Carlton (1983)included
local taxes in his seminal CLM location model (an interurban choice model
without fixed effects), but was unable to demonstrate the relevance of prop-
erty taxes.

Our results for factor costs (land and labor) are not as clear. The same is
true for local market size. While these variables are shown to be statistically
significant in the model with random effects, the same is not true for the
fixed-effects model. With the exception of Papke (1991)and Figueiredo,
Guimaraes & Woodward (2002), previous empirical research on domestic
decisions failed to demonstrate the relevance of land costs [Bartik (1985)and
Hansen (1987)]. Evidence for the negative impact of labor costs on domestic
location decisions was found by Bartik (1985)and Figueiredo, Guimaraes

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