The Local Economic Impacts of Military Personnel Contractions in the 1990s
49 Pages Posted: 12 Oct 2016
Date Written: October 10, 2016
This paper studies the local economic impacts of the U.S. military personnel contractions between 1988 and 2000. I propose a novel empirical strategy combining synthetic control and instrumental variables methods, and jointly estimate the causal effects on the equilibrium quantities and prices of local labor, housing, and product markets. Military personnel contractions substantially reduced local civilian employment, but mainly through reductions in in-migration, local population adjusted quickly, resulting in small changes in wages and large declines in rental prices. Relating these empirical findings to a simple spatial equilibrium model, I show that the welfare cost on workers is small while that on landowners is sizable.
Keywords: Local economic dynamics; Spillover effects; Military contractions
JEL Classification: J21, R12, J61
Suggested Citation: Suggested Citation