Stay or Go? Relocation Decisions of German Manufacturing Plants

In this paper I investigate the relocation decision of manufacturing plants in the German economy. The relocation decision involves whether a plant moves its location from one region to another over a time period or whether it stays in the same region. To analyze the relocation of plants, I constructed a novel dataset based on comprehensive regional data as well as official German firm statistics. The results reveal that in particular an improved regional road infrastructure and accessibility of regions positively affects the decision to relocate a plant in the German economy. A reduction of 10 percent in travel time on roads to reach the three nearest agglomeration centers leads to an increase in the relocation probability of about 9.5 percent on average. Further effects are related to market potential, a better educated workforce, and the regional tax base.