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

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  • Mark Hooker
  • Michael Knetter

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.

Suggested Citation

  • Mark Hooker & Michael Knetter, 1994. "Unemployment Effects of Military Spending: Evidence from a Panel of States," NBER Working Papers 4889, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:4889
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    References listed on IDEAS

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    Cited by:

    1. M. Wiseman, "undated". "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.
    2. Alan J. Auerbach, 1996. "Dynamic Revenue Estimation," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 141-157, Winter.
    3. Julide Yildirim & Selami Sezgin, 2003. "Military expenditure and employment in Turkey," Defence and Peace Economics, Taylor & Francis Journals, vol. 14(2), pages 129-139.
    4. Cosimo Magazzino & Lorenzo Giolli & Marco Mele, 2015. "Wagner’s Law and Peacock and Wiseman’s Displacement Effect in European Union Countries: A Panel Data Study," International Journal of Economics and Financial Issues, Econjournals, vol. 5(3), pages 812-819.
    5. Mohsen Bahmani-Oskooee & Gour Goswami, 2006. "Military spending and the black market premium in developing countries," Review of Social Economy, Taylor & Francis Journals, vol. 64(1), pages 77-91.
    6. Suna Korkmaz, 2015. "The Effect of Military Spending on Economic Growth and Unemployment in Mediterranean Countries," International Journal of Economics and Financial Issues, Econjournals, vol. 5(1), pages 273-280.

    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy

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