An investigation on the aggregate behavior of firm relocations to New Jersey (1990-1999) and the underlying market elasticities

This paper reports the key results of an in depth analysis of ten years worth of data about business relocations to the State of New Jersey. The analyses have focused on the key geographic patterns of business relocations, and an econometric investigation of the role of transportation accessibility on the business relocation process. The estimated models focus on explaining the business relocation behavior, as well as the business relocation flows from the original locations to New Jersey. The first model assumes that the probability of a business relocating to a given location in New Jersey is a function of the combined attraction to the economic poles of New York City and Philadelphia. The results obtained suggest the existence of two opposing trends concerning the role played by New York City. The discrete choice models estimated provide additional insights into the role of transportation accessibility, suggesting that the type of economic activity performed by the firm shapes the firm's valuation of accessibility to markets. The paper also studied the role of transportation accessibility as an explanatory variable of the business relocation flows by means of estimating aggregate demand models and destination constrained gravity models. In all cases the authors were able to estimate statistically significant and conceptually valid models that explain the aggregate behavior of the variables under study. These models were estimated for both the total number of relocations (all firms) as well as the major industry types. The resulting models were used to compute the elasticities with respect to accessibility variables. The chief conclusion is that different industry types exhibit different elasticities. In order to do the computations for the elasticities of the gravity model, the authors developed a mathemat-ical formulation. Simply stated, this formulation demonstrates that the elasticity of the spatial interaction between an origin i and a destination j is s imply the summation of the elasticities at the production end, and at the destination. The market elasticity is then computed as the weighted average of the elasticities for each of the market segments.