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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

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.

Suggested Citation

  • Hooker, Mark A & Knetter, Michael M, 1997. "The Effects of Military Spending on Economic Activity: Evidence from State Procurement Spending," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(3), pages 400-421, August.
  • Handle: RePEc:mcb:jmoncb:v:29:y:1997:i:3:p:400-421
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    Cited by:

    1. 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.
    2. Raphael, Steven & Winter-Ember, Rudolf, 2001. "Identifying the Effect of Unemployment on Crime," Journal of Law and Economics, University of Chicago Press, vol. 44(1), pages 259-283, April.
    3. Andrew B. Bernard & J. Bradford Jensen, 2000. "Understanding Increasing and Decreasing Wage Inequality," NBER Chapters,in: The Impact of International Trade on Wages, pages 227-268 National Bureau of Economic Research, Inc.
    4. Gangopadhyay Partha & Elkanj Nasser, 2009. "Politics of Defence Spending and Endogenous Inequality," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 15(1), pages 1-25, May.
    5. 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.
    6. Eric S. Lin & Hamid E. Ali, 2009. "Military Spending and Inequality: Panel Granger Causality Test," Journal of Peace Research, Peace Research Institute Oslo, vol. 46(5), pages 671-685, September.
    7. 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.
    8. Gabriel Chodorow-Reich, 2017. "Geographic Cross-Sectional Fiscal Spending Multipliers: What Have We Learned?," NBER Working Papers 23577, National Bureau of Economic Research, Inc.
    9. Carlino, Gerald A. & DeFina, Robert H. & Sill, Keith, 2001. "Sectoral Shocks and Metropolitan Employment Growth," Journal of Urban Economics, Elsevier, vol. 50(3), pages 396-417, November.
    10. Katarina Keller & Panu Poutvaara & Andreas Wagener, 2009. "Military Draft And Economic Growth In Oecd Countries," Defence and Peace Economics, Taylor & Francis Journals, vol. 20(5), pages 373-393, October.
    11. Reitschuler, Gerhard & Loening, Josef L., 2005. "Modeling the Defense-Growth Nexus in Guatemala," World Development, Elsevier, vol. 33(3), pages 513-526, March.
    12. Michele Santoni, 2002. "Discriminatory Procurement Policy with Cash Limits," Open Economies Review, Springer, vol. 13(1), pages 27-45, January.
    13. repec:eee:moneco:v:92:y:2017:i:c:p:16-30 is not listed on IDEAS
    14. Agerton, Mark & Hartley, Peter R. & Medlock, Kenneth B. & Temzelides, Ted, 2017. "Employment impacts of upstream oil and gas investment in the United States," Energy Economics, Elsevier, vol. 62(C), pages 171-180.
    15. Owyang, Michael T. & Zubairy, Sarah, 2013. "Who benefits from increased government spending? A state-level analysis," Regional Science and Urban Economics, Elsevier, pages 445-464.
    16. Josselin Droff & Alfredo R. Paloyo, 2015. "Assessing The Regional Economic Impacts Of Defense Activities: A Survey Of Methods," Journal of Economic Surveys, Wiley Blackwell, vol. 29(2), pages 375-402, April.
    17. 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.
    18. Jesús Crespo Cuaresma & Gerhard Reitschuler, 2006. "'Guns Or Butter?' Revisited: Robustness And Nonlinearity Issues In The Defense-Growth Nexus," Scottish Journal of Political Economy, Scottish Economic Society, vol. 53(4), pages 523-541, September.
    19. repec:nbp:nbpbik:v:48:y:2017:i:1:p:73-96 is not listed on IDEAS
    20. Jenn-Hong Tang & Cheng-Chung Lai & Eric Lin, 2009. "Military Expenditure And Unemployment Rates: Granger Causality Tests Using Global Panel Data," Defence and Peace Economics, Taylor & Francis Journals, vol. 20(4), pages 253-267.
    21. Gerald A. 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.
    22. Dupor, William D. & Rodrigo, Guerrero, 2016. "Local and Aggregate Fiscal Policy Multipliers," Working Papers 2016-4, Federal Reserve Bank of St. Louis, revised 02 Jun 2017.
    23. Gabriel Chodorow-Reich, 2017. "Geographic Cross-Sectional Fiscal Multipliers: What Have We Learned?," Working Paper 458091, Harvard University OpenScholar.
    24. Alexander F. McQuoid & J. Britton Haynes Jr., 2017. "The Thin (Red) Blue Line: Police Militarization and Violent Crime," Departmental Working Papers 56, United States Naval Academy Department of Economics.
    25. Michael Insler & Bryce McMurrey & Alexander F. McQuoid, 2016. "From Broken Windows to Broken Bonds: Militarized Police and Social Fragmentation," Departmental Working Papers 53, United States Naval Academy Department of Economics.

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