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The Economic Impact Of The Mercedes Benz Investment On The State Of Alabama

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  • Kebede, Ellene
  • Ngandu, Mudiayi Sylvain

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 the 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 countries were also the beneficiaries of past agglomeration economics in terms of critical physical infrastructure and human resource development.

Suggested Citation

  • Kebede, Ellene & Ngandu, Mudiayi Sylvain, 1999. "The Economic Impact Of The Mercedes Benz Investment On The State Of Alabama," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 31(2), pages 1-12, August.
    • Handle: RePEc:ags:joaaec:15385
    DOI: 10.22004/ag.econ.15385
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    Cited by:

    1. Lei Zhang & Henry Kinnucan & Jing Gao, 2016. "The Economic Contribution of Alabama’s Automotive Industry to Its Regional Economy," Economic Development Quarterly, , vol. 30(4), pages 295-315, November.
    2. Dudensing, Rebekka & Guerrero, Bridget & Amosson, Steve, 2019. "Evaluating the Accuracy of Regional Economic Impact Estimates: Considering a 2013 Beef Plant Closure in Texas," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 49(01), May.

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