Location decisions of firms: A discrete choice model for the St. Gallen region, Switzerland

Abstract

Because of the interdependence between resident population (e.g. as customers or manpower) and economic activities (e.g. shops or services), firm location decisions play an important role in comprehensive land use models. However, due to a lack of data at the micro level permit-ting the estimation of discrete choice models, there is only little research on this topic. In this paper, data from the commercial registers of three Swiss cantons, St. Gallen, Appenzell Ausserrhoden, and Appenzell Innerrhoden, have been analysed. This dataset provides infor-mation on more than 50,000 companies during 1991 to 2006. Various variables such as local taxes, governmental business friendliness, and accessibilities have been tested in a Nested Logit (NL) model. The results show that distance, local taxes, and cantonal business devel-opment have a strong influence on firm location choice. Furthermore, significant differences between sectors can be identified. For instance, residents with graduate degrees have a sig- nificant and high impact on service industries.