FIRM RECRUITMENT BY STATES IN THE UNITED STATES

When large firms relocate their headquarters or manufacturing facilities, it is usually front-page news. These firms realize the potential benefits that they create in a local economy, and so, they require competing jurisdictions to offer incentive packages, just to consider their potential location. Evidence of interstate competition in the literature only suggests through limited examples that the competition among states for firms does exist. This paper overcomes the data problem by creating an innovative panel data set that explicitly captures state recruitment spending. This paper is the first such study to test empirically for the presence of competition at the state level using high-quality recruitment spending data. The lack of high-quality data to explain the factors driving interregional competition for firms is why there exist only a few empirical studies. This paper uses a GS2SLS-GMM spatial model, among others, to test whether states are spatially interdependent.