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The economic effects of rearmament: Evidence from Nazi Germany

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  • Chambon, Lionel

Abstract

Using novel archival data on the German Luftwaffe, I estimate the causal effect of military spending on unemployment in Nazi Germany between 1932 and 1936. Exploiting cross-district variation of supplier locations, I estimate the impact of military procurement on local labor market outcomes. I find that the average supplier location experienced a decline in unemployment per capita of approximately 6 percentage points. A back-of-the-envelope calculation suggests that total military spending represents around 32% of the observed aggregate fall in unemployment. I also find evidence of significant spillovers, indicating that my results likely underestimate the true effect of military spending.

Suggested Citation

  • Chambon, Lionel, 2026. "The economic effects of rearmament: Evidence from Nazi Germany," Kiel Working Papers 2322, Kiel Institute for the World Economy.
    • Handle: RePEc:zbw:ifwkwp:341631
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    References listed on IDEAS

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    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-
    • N44 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Europe: 1913-

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