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Foreign Direct Investment, Exports and Long-term Economic Growth in Alabama: A Co-integration Analysis

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  • Sergio Castello
  • Anindya Biswas

Abstract

This article provides a state-specific co-integration study by linking exports and foreign direct investment (FDI) to economic growth in Alabama. The study aims to determine how much of Alabama’s economic growth is driven by exports. Mercedes-Benz and its announcement of a US$600 million investment in 1993 started a surge of FDI and exports never seen before in the state accelerating its long-run economic growth path. Twenty years later, Mercedes-Benz has invested over US$4.5 billion and can produce 300,000 vehicles per year. This study analyses the importance of exports and FDI in the Alabama economy and establishes significant evidence of the positive relationship between Total Gross Domestic Product for Alabama (ALNGSP) and its exports from 1999 to 2017, whereas it does not find a statistically significant impact of the FDI on Alabama’s growth. We conclude that Alabama needs to focus on three main policies to continue its economic success. First, it needs to continue to attract FDI in these sectors to build a vast supplier network. Second, Alabama must allocate new investments in infrastructure and finally, it needs to continue to be a friendly state to businesses, providing skilled labour, low corporate taxes and less bureaucracy. JEL: C82, L62, O51

Suggested Citation

  • Sergio Castello & Anindya Biswas, 2021. "Foreign Direct Investment, Exports and Long-term Economic Growth in Alabama: A Co-integration Analysis," Arthaniti: Journal of Economic Theory and Practice, , vol. 20(1), pages 86-94, June.
    • Handle: RePEc:sae:artjou:v:20:y:2021:i:1:p:86-94
    DOI: 10.1177/0976747920906268
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    More about this item

    Keywords

    Export-led growth; foreign direct investment; net gross state product; Alabama-economy; automobile industry; state-specific cointegration studies;
    All these keywords.

    JEL classification:

    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada

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