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

Approved for public release; distribution is unlimited / This thesis identifies and explains the critical changes that have occurred in the complex system of interrelated rules which have governed the defense budget process in Poland since 1989. This research explains the legal and institutional evolution of the defense budget process in post-communist Poland, focusing on the role of legislative authority i.e., the Sejm and the Senat of the Republic of Poland within the defense budget process since the collapse of the Warsaw Pact. It also analyzes the distribution of power among the different actors in the budget cycle. This is followed by a thorough description of rules imposed by the Law on Restructuring, Technical Modernization and Financing of the Polish Armed Forces in the Years 2001-2006, and the Act of Equipping the Armed Forces of the Republic of Poland with Multi-Role Aircraft. These two documents were instrumental in shaping defense spending in Poland in the years 2001-2003 and will have a great impact on future decisions concerning defense budgets in the years to come. An overview of defense spending by European members of NATO is also provided to allow a comparison of Poland's willingness to commit resources to the common defense of other NATO members. / Captain, Polish Air Forces

<p>  </p> <p>This dissertation is composed of three independent chapters in the field of the economic geography and international trade. However, there is one uniting theme between all three chapters: geographic spillovers. In each chapter, a source of geographic spillovers that is relevant to policymakers is investigated. Further, each chapter addresses a theoretical or data-driven challenge to identifying these spillovers and implements an improved methodology for estimation. In particular, the first chapter studies agglomeration and congestion spillovers, the impact of employment density on the productivity of workers and the amenities associated with living in a location, respectively, by using variation from a natural experiment. The second chapter studies fiscal multipliers, the effect of government spending on economic activity, by using variation from the same natural experiment. Finally, the third chapter studies import spillovers, the impact of neighboring firms' experience sourcing from foreign markets on the likelihood that firms in the same location and industry enter into those same markets, by using detailed data on Serbian firms.</p> <p><br></p> <p>In the first chapter, <em>Agglomeration and Congestion Spillovers: Evidence from Base Realignment and Closure</em>, I quantify agglomeration and congestion spillovers using variation from a natural experiment by instrumenting for changes in local employment with proposed changes to civilian employment at military installations through the Base Realignment and Closure (BRAC) process. I find an agglomeration spillover elasticity consistent with the existing literature. However, my estimate of the congestion spillover elasticity is smaller in magnitude than common parameterizations of quantitative economic geography models. All else equal, with a weaker congestion spillover elasticity, more of the distribution of economic activity across space is due to natural advantages and disadvantages. This result implies smaller gains from implementing the optimal spatial policy. </p> <p><br></p> <p>In the second chapter, <em>Local Fiscal Multipliers and Defense Spending</em>, I estimate county-level fiscal multipliers using shocks to military employment to instrument for local defense spending. Aggregate shocks to military employment are subject to the Base Realignment and Closure process, which is designed to isolate the recommendations of the Department of Defense from political influences. By exploiting variation in military employment, I address the endogeneity of government spending when using changes in defense spending to estimate fiscal multipliers. In addition, this method addresses the attenuation bias due to geographic measurement error that results from using data on military contracts alone with small geographic units. This extends the common method for estimating state- and national-level fiscal multipliers using variation in defense spending to more local geographic units. My estimates imply a local income multiplier between 0.5 and 0.8, which is smaller than existing estimates that use non-defense-based sources of variation, but larger than the existing estimates based on variation in defense contract spending. </p> <p><br></p> <p>In the third chapter, <em>International Sourcing and Firm Learning: Evidence from Serbian Firms</em>, we find that compared to non-importers, importers are more productive and pay higher wages as they source better quality and cheaper production inputs. However, little is known about how these firms learn about their sourcing markets. We quantify the impact of neighboring firms' importing experience on the decision to start sourcing inputs from new markets using merged customs and administrative data from Serbian firms. We find that firms are more likely to start importing from a new market if firms in the same industry and location have imported from that market and if those firms increased their imports over time. Further, our results support a distinction between imports and exports for the decision to enter foreign markets; unlike exports, import sourcing choices are not independent across countries, but are substitutes. We also investigate origin-country and firm heterogeneity. Our results indicate that the impact of neighboring firms' importing experience is greater for source countries in the European Union market and for firms that are high productivity, foreign owned, and previous importers. Together, these findings suggest that a firm's spatial connections are an important factor in its access to global markets as sources for inputs.</p>

The defense spending plays a significant role in the decision-making process of setting up a defense policy. The economy of a state, its performance and development rank among the main factors that influence the size of this public expenditure. At a time of economic stagnation in the Western European countries, the ongoing public debt crisis affects to a ever growing extent all areas of public spending, including the defense. This work aims to contribute to the current knowledge in the field of defense economy and public finance by investigating the influence of the state debt on defense spending. The first part of the work is dedicated to defining the economy of defense and providing a brief summary of its historical development, followed by a discussion of defense as a pure public good. This chapter analyzes the issue of public debt and explains how the major schools of economic theory approach this problem. The second part outlines the previous research in the field of defense spending and debt, their development and the potential relationship with macroeconomic variables. The third chapter presents and discusses the results of empirical research that is based on the theoretical assumptions and models introduced in the first two chapters. The analysis was performed on time series from the period of 1978 to 2011 (34 years) for seven NATO member states: Belgium, Denmark, France, Italy, Netherlands, UK and USA. The empirical analysis was performed by the statistical methods of regression and panel regression. The primary hypothesis on the existence of a relationship between the public debt and defense spending was confirmed and the partial hypothesis that this relationship is negative was refuted.

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