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What makes German manufacturing plants move locations?
1Department of Management and Economics, Center for Entrepreneurship, Innovation and Transformation (CEIT), Ruhr University Bochum, Universitaetsstrasse 150, 44801 Bochum, Germany.
The Annals of Regional Science
|April 19, 2024
Summary
Manufacturing plants are more likely to relocate to German regions with better road infrastructure and a skilled workforce. Improved accessibility and human capital incentives can attract businesses.
Area of Science:
- Economics
- Economic Geography
- Regional Science
Background:
- Manufacturing plant relocation is a critical factor in regional economic dynamics.
- Understanding the drivers of plant relocation is essential for regional development policies.
- Existing research often distinguishes relocation from initial location decisions.
Purpose of the Study:
- To investigate the relocation decisions of manufacturing plants within Germany's NUTS-3 regions.
- To identify key pull and push factors influencing these relocation decisions.
- To utilize official German regional and firm statistics for a comprehensive analysis.
Main Methods:
- Analysis of official German regional and firm statistics, leveraging detailed data for the first time.
- Econometric modeling to assess the impact of various factors on relocation probability.
- Quantification of the relationship between accessibility improvements and relocation likelihood.
Main Results:
- Regional road infrastructure and accessibility significantly influence plant relocation decisions.
- The quality of the available labor force is a positive determinant for relocation.
- A 10% reduction in road travel time to agglomeration centers increases relocation probability by approximately 9.5%.
Conclusions:
- Improving regional accessibility and infrastructure is crucial for attracting manufacturing plants.
- Investing in human capital and workforce quality can enhance a region's attractiveness for businesses.
- Policy interventions should focus on infrastructure development and labor force support to stimulate regional economic activity.
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