Manufacturing Matters: A Case Study of Alabama

Abstract

Over the last fifty years, the United States has been marked by two important secular trends. One is a continuous increase in income inequality. Second, the nation has transitioned through three periods of manufacturing: (a) “The Industrial Period” during 1945-1979, (b) the “Deindustrialization of America” during 1980-2000, and (c) the “Re-industrialization of America” during 2000-present, as it began to shift to an economy largely dominated by service and knowledge jobs, with a major reduction in labor-intensive manufacturing. This study examines the relationship between manufacturing employment and income inequality in the state of Alabama to test the hypothesis that manufacturing plays a key role in moderating inequality. In particular, we consider whether manufacturing or other economic and demographic factors are determinants of the rising income inequality in Alabama. We control for other factors that are also likely to be related to rising income inequality. We employ empirical techniques that are best suited to address potential econometric problems in the empirical work. In general, our results indicate that manufacturing does indeed play a key role in moderating inequality. Other key findings are that more educated communities have less inequality, that rural areas have especially high inequality, that counties with a high proportion of African Americans face disproportionately high inequality, and that the poorest counties have the highest level of inequality Keywords: Manufacturing, Deindustrialization, Reindustrialization, Income Inequality DOI: 10.7176/JESD/11-6-12 Publication date: March 31 st 2020