Upgrading Industrial Capacity in the Peripheral US: The Failure of Local Incentives Policy to Create a Southern Auto Production Network.

Authors: William Graves*, University of North Carolina - Charlotte
Topics: Economic Geography, Urban and Regional Planning, Business Geography
Keywords: Economic development, production networks, policy analysis
Session Type: Paper
Day: 4/6/2019
Start / End Time: 5:00 PM / 6:40 PM
Room: Marriott Ballroom Salon 3, Marriott, Lobby Level
Presentation File: No File Uploaded

The US auto production industry has shifted into Southern states as the region’s economic development policy has leveraged the region’s low wages with large incentives payments to attract foreign-owned assembly facilities. This policy has been expanded throughout the region based on the expectation that the accumulation of supplier facilities to the auto assemblers will create an industrial cluster and integrate the region into larger production networks. This project analyzes 35 years of county-level panel data for on employment and income change to assess the success of these regional development policies. It was found that the counties surrounding 11 auto assembly facilities did not outperform our control counties in terms of total and manufacturing employment growth or income growth. This failure of state economic development policy to create a local production network is explained using several strategies. First, the location decisions of supplier firms are steered by states into sites that may be distant from assembly facilities in an effort to keep local wages low. Second, we identified changes in the traditional, proximity-based intra-firm relationships in the auto assembly industry – our 10 state study area revealed an increased use of ‘kitting’ logistics by manufacturers in an effort to reduce the number of local suppliers. Finally, commercially available cell phone tracking data was used to trace the source of assembly facility workers – it was found that many assembly plant workers live far from the employment site – a situation which further impeads the development of a production cluster.

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