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The Effects of Military Spending on Economic Activity: Evidence from State Procurement Spending

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  • Hooker, Mark A
  • Knetter, Michael M
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    Abstract

    The authors use state data from the period 1963-94 to estimate the response of employment growth to military procurement spending. The state-year panel provides greater variation in both variables than aggregate data. There are two main findings. First, military procurement spending does explain a statistically significant degree of the variation in employment growth across states, even in the presence of fixed effects for time and state and other controls. Second, the authors find evidence in support of a nonlinear relationship between procurement spending and employment growth. In particular, large adverse state procurement shocks have proportionately larger effects on state employment growth rates. Copyright 1997 by Ohio State University Press.

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    Bibliographic Info

    Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

    Volume (Year): 29 (1997)
    Issue (Month): 3 (August)
    Pages: 400-421

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    Handle: RePEc:mcb:jmoncb:v:29:y:1997:i:3:p:400-421

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    Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

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    Cited by:
    1. Gerald A. Carlino, 2003. "A confluence of events? explaining fluctuations in local employment," Business Review, Federal Reserve Bank of Philadelphia, issue Q1, pages 6-12.
    2. Keller, Katarina & Poutvaara, Panu & Wagener, Andreas, 2006. "Military Draft and Economic Growth in OECD Countries," IZA Discussion Papers 2022, Institute for the Study of Labor (IZA).
    3. Andrew B. Bernard & J. Bradford Jensen, 1998. "Understanding Increasing and Decreasing Wage Inequality," NBER Working Papers 6571, National Bureau of Economic Research, Inc.
    4. Reitschuler, Gerhard & Loening, Josef L., 2005. "Modeling the Defense-Growth Nexus in Guatemala," World Development, Elsevier, vol. 33(3), pages 513-526, March.
    5. Jesús Crespo Guaresma & Gerhard Reitschuler, 2003. ""Guns or Butter?" Revisited: Robustness and Nonlinearity Issues in the Defense-Grotwth Nexus," Vienna Economics Papers 0310, University of Vienna, Department of Economics.
    6. Gerald A. Carlino & Robert H. DeFina & Keith Sill, 2000. "Sectoral shocks and metropolitan employment growth," Working Papers 00-9, Federal Reserve Bank of Philadelphia.
    7. Raphael, Steven & Winter-Ebmer, Rudolf, 1999. "Identifying the Effect of Unemployment on Crime," CEPR Discussion Papers 2129, C.E.P.R. Discussion Papers.
    8. Michele Santoni, 2002. "Discriminatory Procurement Policy with Cash Limits," Open Economies Review, Springer, vol. 13(1), pages 27-45, January.
    9. Owyang, Michael T. & Zubairy, Sarah, 2013. "Who benefits from increased government spending? A state-level analysis," Regional Science and Urban Economics, Elsevier, vol. 43(3), pages 445-464.
    10. Michele Santoni, 2001. "Discriminatory procurement policy with cash limits can lower imports: an example," Departmental Working Papers 2001-03, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    11. Chad R. Wilkerson & Megan D. Williams, 2008. "How is the rise in national defense spending affecting the Tenth District economy?," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 49-79.
    12. Gerald Carlino & Keith Sill, 1998. "The cyclical behavior of regional per capita incomes in the postwar period," Working Papers 98-11, Federal Reserve Bank of Philadelphia.
    13. Gerhard Reitschuler & Ludger J. Löning, 2004. "Modeling the Defense-Growth Nexus in a Post-Conflict Country - A Piecewise Linear Approach," Ibero America Institute for Econ. Research (IAI) Discussion Papers 097, Ibero-America Institute for Economic Research.

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