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Unemployment Effects of Military Spending: Evidence from a Panel of States

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  • Mark Hooker
  • Michael Knetter
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    Abstract

    We use data on a panel of states over a 30 year sample to estimate the response of unemployment to military procurement spending. The state panel provides greater variation in both variables and permits us to examine whether responses to procurement spending shocks vary across states. Our main finding is that changes in procurement spending significantly affect unemployment in states heavily dependent on the military sector and subject to large such changes, and that accounting for this variation in responses across states adds approximately 40% to the estimated aggregate unemployment impact of the current drawdown.

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    File URL: http://www.nber.org/papers/w4889.pdf
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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4889.

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    Date of creation: Oct 1994
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    Publication status: published as Journal of Money, Credit, and Banking (August 1997): 400-421.
    Handle: RePEc:nbr:nberwo:4889

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    1. Ramey, Valerie A, 1989. "Inventories as Factors of Production and Economic Fluctuations," American Economic Review, American Economic Association, American Economic Association, vol. 79(3), pages 338-54, June.
    2. A Carruth & M Hooker & A Oswald, 1994. "Unemployment, Oil Prices and the Real Interest Rate: Evidence from Canada and the UK," CEP Discussion Papers dp0188, Centre for Economic Performance, LSE.
    3. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
    4. Topel, Robert H, 1986. "Local Labor Markets," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 94(3), pages S111-43, June.
    5. Nickell, Stephen J, 1990. "Unemployment: A Survey," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 100(401), pages 391-439, June.
    6. Timothy J. Bartik, 2003. "Local Economic Development Policies," Upjohn Working Papers and Journal Articles, W.E. Upjohn Institute for Employment Research 03-91, W.E. Upjohn Institute for Employment Research.
    7. Robert E. Hall, 1986. "The Relation Between Price and Marginal Cost in U.S. Industry," NBER Working Papers 1785, National Bureau of Economic Research, Inc.
    8. Marston, Stephen T, 1985. "Two Views of the Geographic Distribution of Unemployment," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 100(1), pages 57-79, February.
    9. Shea, John, 1993. "The Input-Output Approach to Instrument Selection," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 11(2), pages 145-55, April.
    10. Joe Peek & Eric S. Rosengren, 1992. "The capital crunch in New England," New England Economic Review, Federal Reserve Bank of Boston, Federal Reserve Bank of Boston, issue May, pages 21-31.
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    Cited by:
    1. Alan J. Auerbach, 1996. "Dynamic Revenue Estimation," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 10(1), pages 141-157, Winter.
    2. Julide Yildirim & Selami Sezgin, 2003. "Military expenditure and employment in Turkey," Defence and Peace Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 14(2), pages 129-139.
    3. Mohsen Bahmani-Oskooee & Gour Goswami, 2006. "Military spending and the black market premium in developing countries," Review of Social Economy, Taylor & Francis Journals, Taylor & Francis Journals, vol. 64(1), pages 77-91.
    4. M. Wiseman, . "State strategies for welfare reform: The Wisconsin Story (Revised)," Institute for Research on Poverty Discussion Papers 1066-95, University of Wisconsin Institute for Research on Poverty.

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