Abstract
Firms seeking sites for new or expansion plants rely on their ability to assess the
benefits and costs generated by locating operations in a given state. State
governments strive to understand the issues important to firms who are seeking
a site for new operations or branch plants. They do so because attracting
branch plants and new firms is critical to their economic growth. In addition to
factors traditionally considered important to industrial location decisions (energy
prices, wage levels, unionization, taxes, and public services), this study also
considers the impact of the average level of education attained by the population
of a state. Specifically, this study hypothesizes that the average level of
education attained by a state's labor force significantly affects the location
decisions of firms oriented toward local inputs.
Results indicate that educational attainment is a significant determinant of where
firms in the transportation industry decide to locate or expand operations. However, educational attainment is not a significant determinant for the
electronic equipment industry. Wage and unemployment levels are significant
factors for both industries. With the exception of educational attainment and tax
levels, the results do not vary across industries. Since industries such as
transportation equipment seem to place a premium on states with a relatively high level of education attainment, states wishing to attract this type of
companies may find it beneficial to encourage higher education, both for the
well-being of its residents and for the economy of the state.
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