Foreign direct investment and sustainable local economic development: spatial patterns of manufacturing foreign direct investment and its impacts on middle class earnings
Park, Jeong Il
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Foreign Direct Investment (FDI) in the United States, which predominately occurs in the manufacturing sector, remains critically important for a strong regional and local economy, due to the resulting increase in employment, wages, and tax revenue. Traditionally, local economic development strategies have focused on attracting external manufacturing plants or facilities as the primary route to economic growth, through the expansion of the tax base and/or an increase in employment. In comparison, Sustainable Local Economic Development (SLED) emphasizes the establishment of a minimum standard of living for all and an increase in this standard over time; a reduction in the steady growth in inequality among people; a reduction in spatial inequality; and the promotion and encouragement of sustainable resource use and production (Blakely & Leigh, 2010). These essential SLED principles motivate this study, which will seek to develop a better understanding of whether and how FDI contributes to SLED in terms of its spatial patterns and its impact on middle class earnings. By selecting Georgia as a case study area, this research specifically examines whether and how the location of manufacturing FDI has reduced (or increased) spatial inequality at the intra-state and intra-metropolitan levels. It also identifies whether and how manufacturing FDI has reduced (or increased) inequality among people, focusing on its impact on middle class earnings. This study finds a strong spatial concentration of manufacturing FDI employment in metropolitan areas, particularly in a large metropolitan area, at the intra-state spatial pattern analysis. The results of panel regression analysis suggest that presence of agglomeration economies in metropolitan areas has positively influenced the location of manufacturing FDI jobs. The study also finds a suburbanization pattern of manufacturing FDI employment in the intra-metropolitan spatial pattern analysis. This intra-metropolitan suburbanization of FDI in manufacturing jobs is associated with loss of urban industrial land in the central areas within a large metropolitan area. These uneven distribution patterns of manufacturing FDI jobs indicate increased spatial inequality at both intra-state and intra-metropolitan levels, but the implications of this finding are mixed. Using individual earnings data from the American Community Survey Public Use Microdata Sample files, this study also conducts a quantile regression to estimate the earnings distribution effects that a concentration of manufacturing FDI may have on different earnings groups. The findings both from place-of-work and place-of-residence earnings analysis suggest that manufacturing FDI generally has reduced inequality among people. The concentration of manufacturing FDI in a certain area show the largest distribution effects on area workers in the lower earnings group and residents in the middle earnings group.