Contribution of the U.S. Motor Vehicle to the Economies of the United States, California, New York, and New Jersey in 2003

Full Description:

The motor vehicle industry continues to be one of the most important sectors of the U.S. economy. It is sufficiently prominent to influence the movements of Gross Domestic Product, and it employs hundreds of thousands of workers in well-paying jobs across the country. Significant as the industry statistics are, however, they still understate the contribution of the industry to the national and regional economies. They refer only tangentially to new motor vehicle dealer retail activities, and they focus on direct activity in manufacturing, ignoring spin-off activities related to automotive production. Spin-off activities come from two sources: indirect effects, or purchases from local suppliers (for example, steel); and expenditure-induced effects, or spending by people who receive income attributable to automotive industry activity (for example, spending by realtors of income received from selling homes to autoworkers). It is the sum of these direct and spin-off activities from the making, selling, and servicing of new vehicles that determines the total contribution of the automotive industry to the national and regional economies. For regions with little if any direct automotive manufacturing activity, the industry can still contribute to their economies because spin-off employment is generated by the feedback effects of direct automotive employment in other regions. For instance, when autoworkers in Michigan go to movies, California’s entertainment industry benefits—an effect that our model is sufficiently sophisticated to capture.

Prepared by: Institute of Labor and Industrial Relations, University of Michigan and the Economics and Business Group, Center for Automotive Research

Prepared for: Alliance of Automobile Manufacturers, Inc.