| Abstract: | Little evidence is currently available on the regional growth effects of federal defense spending. In this study, econometric models for state personal income and manufacturing employment between 1976 and 1985 are specified and estimated. Pooled cross-sectional time-series data are used, and the estimation procedure corrects for serial correlation, heteroscedasticity, and contemporaneous cross-sectional correlation. The results indicate that aggregate defense spending has a positive effect on both growth measures. However, when defense expenditures are disaggregated, only investment-type outlays appear to consistently affect state economic growth. |
