Rates of Return and Industrial Investment in Metropolitan Areas with Particular Reference to Cleveland

by Aaron S. Gurwitz, Sheila Nataraj Kirby


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This Note examines the relationship between rates of return on existing capital invested in regions in durable goods manufacturing industries on time series variation in new investment in regions in those industries. Particular focus is on Cleveland, but a pooled sample of data for five other metropolitan regions is also analyzed. Results indicate significant, substantial rate of return effects: investment appears to flow toward the highest rate of return. This finding is especially strong because a number of potential errors and biases in the data all tend to conceal or work against the expected effect.

This report is part of the RAND Corporation note series. The note was a product of the RAND Corporation from 1979 to 1993 that reported other outputs of sponsored research for general distribution.

The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.