Scandinavian Working Papers in Economics

Ratio Working Papers,
The Ratio Institute

No 257: Firm's Evaluation of Location Quality: Evidence from East Germany

Alexander Eickelpasch , Georg Hirte and Andreas Stephan ()
Additional contact information
Alexander Eickelpasch: DIW Berlin
Georg Hirte: TU Dresden
Andreas Stephan: The Ratio institute and Jönköping university, Postal: The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden

Abstract: Our study provides evidence for rms' evaluation of location quality. We use a 2004 survey of 6,000 East German rms that contained questions on the importance and assessment of 15 di erent 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 nancial institutions and region's \image". The results show (1) a great deal of heterogeneity in terms of which rm- or regional-level characteristics are important in the evaluation of a speci c location factor, (2) that the model's explanatory power is, overall, low and thus neither location characteristics nor internal factors are fully re ected in the perceptions, (3) that a rm'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 ndings is that location policy should consider rms' perception of a speci c location in addition to improving the actual attributes of that location.

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

JEL-codes: R12

36 pages, August 17, 2015

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