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Economic Brief

Oct. 12, 2021

Richmond Fed Research Explores How Firms Choose Where to Locate

How do firms decide where to set up locations? According to the Richmond Fed’s latest Economic Brief, it depends on the size and productivity of the firm.

Economist Nicholas Trachter and research analyst Samira Gholami noted that firms want to be close to demand but have to be concerned with opening and managing too many locations. They found that firms with high productivity place more establishments in dense locations and fewer establishments in low-density locations. Conversely, firms with low productivity place more establishments in low-density locations and fewer in higher-density locations.

The Richmond Fed’s Economic Brief series provides essays on economic issues and trends. Sign up to receive an email notification when a new essay is posted.

As part of our nation’s central bank, the Richmond Fed is one of 12 regional Reserve Banks working together with the Board of Governors to support a healthy economy and deliver on our mission to foster economic stability and strength. We connect with community and business leaders across the Fifth Federal Reserve District — including the Carolinas, District of Columbia, Maryland, Virginia, and most of West Virginia — to monitor economic conditions, address issues facing our communities, and share this information with monetary and financial policymakers. We also work with banks to ensure they are operating safely and soundly, supply financial institutions with currency that’s fit for distribution, and provide a safe and efficient way to transfer funds through our nation’s payments system.


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