Date of Award

1-13-2008

Degree Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Economics

First Advisor

Dr. Geoffrey K. Turnbull - Chair

Second Advisor

Dr. Gregory B. Lewis

Third Advisor

Dr. David L. Sjoquist

Fourth Advisor

Dr. Douglas J. Krupka

Abstract

Economic growth is a major concern for state governments. One method that states use to spur economic growth is recruiting firms to relocate or expand within their state. Headlines and press releases from high–profile recruitment cases suggest that states compete with each other to recruit firms. The primary question in this dissertation is whether states compete to recruit firms. A unique panel data set that captures a state’s firm recruitment effort now provides the opportunity to answer this question. A variety of econometric methods (2SLS, MLE, and GS2SLS–GMM) isolate the spatial interdependence effect, and the empirical results show states do compete with each other to recruit firms. Another question answered in this dissertation is whether it matters how researchers measure a state’s effort to recruit firms. The results reveal that it is important to capture only spending related to firm recruitment, as other measures provide fundamentally different results. In addition, this dissertation tests for the nature of rivalry between states and shows that states compete with other states that are economically or demographically similar. The results of competition are not only robust, but large in magnitude as well. States are very responsive to their rival’s effort to recruit firms. Can states stop spending on firm recruitment? If they do, the other states will capture their potential firms–thus the competition to recruit firms does not seem likely to end soon.

DOI

https://doi.org/10.57709/1061480

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