Approved for public release; distribution is unlimited / This thesis evaluates the impact of spending by the Department of Defense and the Federal Government upon the economic growth of the states in which funds are expended. A pooled cross-section and time-series analysis is performed on a data base describing the period 1976-1985 and including the forty-eight contiguous states. Personal income is used as a proxy to measure economic growth. The econometric models are estimated using three separate regression methodologies. Consistent parameter estimates permit the author to conclude that Defense Investment spending is highly associated with economic growth. Defense Expense spending is less highly associated with growth. Federal spending other than for defense or intergovernmental aid to state and local governments exhibits an inconclusive relationship with economic growth. / http://archive.org/details/effectsofdepartm00anas / Lieutenant Commander, United States Navy