Abstract
We develop a geographical-based vibrancy index using important location characteristics from the Urban Economics literature that measure local economic health. We show that the vibrancy index not only predicts firm policy variables such as investment and leverage, but also predicts firm performance and firm value. More vibrant firms are located in counties with more highly educated populations, lower unemployment, higher labor force participation rate, higher home values, higher density of firms that pay higher wages, and a higher percent above poverty than do low vibrancy locations. Our results indicate that the local vibrancy of a firm headquarters is an important determinant of firm policies and profitability.
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