MIT’s Susan Hockfield makes a number of excellent points hereÂ but she doesn’t discuss the incentives for real world manufacturing plants to locate in the USA.Â Â In the absence of heavy industrial policy subsidies, does the United States offer the cost minimizing location for a specific manufacturing plant?Â Â Given that our workers are paid more in salary and benefits than international locations, when will a self interested firm locate here rather than where labor is cheap?Â Â
If U.S workers earn twice as much as foreign counterparts, then we will need to be at least twice as productive.Â This is why she discusses our educational system.Â If transportation costs are high for production inputs or final outputs and if final customers or input suppliers are located in the United States, then this will provide firms with a cost incentive to locate here.Â Â An alternative mechanism is that there are synergies between our research universities and production facilities. If face to face meetings are required to continue to improve the product, then I can imagine that production would be more likely to take place here.Â
Erin Mansur and I have worked on the geography of U.S manufacturingÂ jobs and how such employment responds to electricity prices, labor regulations and air quality regulation. See this.