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The Economic Impact of the Mercedes Benz Investment on the State of Alabama

Published online by Cambridge University Press:  28 April 2015

Ellene Kebede  and
Mudiayi Sylvain Ngandu
Ellene Kebede
Affiliation:
Tuskegee University, Tuskegee, Alabama
Mudiayi Sylvain Ngandu
Affiliation:
Tuskegee University, Tuskegee, Alabama
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Abstract

As part of its strategy to attract new businesses, in 1994 the State of Alabama won the Mercedes Benz bid to establish an automobile assembly plant in Vance, Tuscaloosa County, Alabama at the cost of $222 to $253 million worth of incentives. The study assessed the economic impact of the Mercedes Benz investment using IMPLAN. The IMPLAN industry code 49, industrial construction, and industry code 384, motor vehicle, were used to project the impact of the investment for the construction and production phases respectively. The results from four scenarios indicated that the investment would generate sizable direct and indirect employment, income, output, and tax revenue for the state economy. From the estimated revenue, the pay-out period for the cost of the incentive would be from four to seven years. The scenarios also indicated that the increase in the volume of locally purchased automobile parts will increase the multiplier effects for the state economy. Currently, the direct benefits from suppliers accrue to other states with established suppliers networks. The finding also suggested a heavy concentration of the impact of Mercedes Benz plant in the north and northeast part of the state. These counties were also the beneficiaries of past agglomeration economies in terms of critical physical infrastructure and human resource development.

Keywords

economic impactIMPLANMercedes Benzspin-off effects
Type
Articles
Information
Journal of Agricultural and Applied Economics , Volume 31 , Issue 2 , August 1999 , pp. 371 - 382
Copyright
Copyright © Southern Agricultural Economics Association 1999

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