IS EDUCATIONAL ATTAINMENT A SIGNIFICANT DETERMINANT OF WHERE FIRMS DECIDE TO LOCATE OR EXPAND OPERATIONS?

Firms seeking sites for new or expansion plants rely on their ability to assess thebenefits and costs generated by locating operations in a given state. Stategovernments strive to understand the issues important to firms who are seekinga site for new operations or branch plants. They do so because attractingbranch plants and new firms is critical to their economic growth. In addition tofactors traditionally considered important to industrial location decisions (energyprices, wage levels, unionization, taxes, and public services), this study alsoconsiders the impact of the average level of education attained by the populationof a state. Specifically, this study hypothesizes that the average level ofeducation attained by a state's labor force significantly affects the locationdecisions of firms oriented toward local inputs. Results indicate that educational attainment is a significant determinant of wherefirms in the transportation industry decide to locate or expand operations. However, educational attainment is not a significant determinant for theelectronic equipment industry. Wage and unemployment levels are significantfactors for both industries. With the exception of educational attainment and taxlevels, the results do not vary across industries. Since industries such astransportation equipment seem to place a premium on states with a relatively high level of education attainment, states wishing to attract this type ofcompanies may find it beneficial to encourage higher education, both for thewell-being of its residents and for the economy of the state.