An Evaluation of the Economic Impact of the Foxconn Proposal

Noah Williams Executive Summary: In this paper I evaluate the potential economic impact of the Foxconn plant on the Wisconsin economy. I consider factors affecting both the direct impact of the Foxconn plant, as well as the additional broader impacts that it may have. If implemented as planned, the direct impact of the plant will be substantial, and the broader impacts could go far beyond typical fiscal policies. In particular, the opening of a large scale high tech manufacturing operation by a multinational corporation has the potential to generate significant spillovers. Drawing on the economic literature on plant openings and foreign direct investment, I analyze the magnitude of these potential gains. While direct employment multipliers in the literature range from 1.7 to more than 3, those most relevant in this case are in the 2.5-3.0 range. Thus if Foxconn accounts for 13,000 direct jobs, it may generate a total of 32,000-39,000 jobs directly and through its supply chain, suppliers of employees, spillovers on existing firms, and new investments. I also review the economic evaluations which have been previously carried out, and evaluate some of the concerns that have been raised about the proposal. In the overall evaluation of the Foxconn package, the uncertain but potentially large gains in jobs, wages, output, and incomes must be weighed against the certain fiscal costs. Read Full Report