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.
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