Firms’ Evaluation of Location Quality: Evidence from East Germany

Alexander Eickelpasch 1 , Georg Hirte 2 ,  and Andreas Stephan 3
  • 1 DIW Berlin, Mohrenstr. 58, 10117 Berlin, Germany
  • 2 Technische Universität Dresden, Fakultät Verkehrswissenschaften, Institut für Wirtschaft und Verkehr, Helmholtzstraße 10, 01069 Dresden, Germany
  • 3 Jönköping University, Gjuterigatan 5, Jönköping, Sweden; and Ratio Institute, Stockholm, Sweden
Alexander Eickelpasch, Georg Hirte and Andreas Stephan

Abstract

Our study provides evidence for firms’ evaluation of location quality. We use a 2004 survey of 6,000 East German firms that contained questions on the importance and assessment of 15 different 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 financial institutions and region’s “image”. The results show (1) a great deal of heterogeneity in terms of which firm- or regional-level characteristics are important in the evaluation of a specific location factor, (2) that the model’s explanatory power is, overall, low and thus neither location characteristics nor internal factors are fully reflected in the perceptions of location quality, (3) that a firm’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 findings is that location policy should consider firms’ perception of a specific location in addition to improving the actual attributes of that location.

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The Journal of Economics and Statistics is a scientific journal published in Germany since 1863. The Journal publishes papers in all fields of economics and applied statistics. A specific focus is on papers combining theory with empirical analyses.

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