State Characteristics and the Location of Foreign Direct Investment within the United States

Abstract

A conditional logit model of the location decision of foreign firms investing in manufacturing facilities in the United States is developed and estimated. The authors results for 1981-83 indicate that states with higher per capita incomes and higher densities of manufacturing activity attracted relatively more foreign direct investment. In addition, higher wages deterred foreign direct investment, while higher unemployment rates attracted it. Surprisingly, higher unionization rates were associated with increased foreign direct investment. Overall, higher taxes deterred foreign direct investment; however, more extensive transportation infrastructures and larger promotional expenditures were associated with increased foreign direct investment. Copyright 1991 by MIT Press.