A Human Capital Model of the Defense-Growth Relationship

• Other Authors: McDonald, Bruce D. (authoraut)
• Format: Others
• Language: English; English
• Published: Florida State University
• Subjects: Public policy; Public administration
• Online Access: http://purl.flvc.org/fsu/fd/FSU_migr_etd-5028

One of the most important questions rising out of the War on Terror and the end of the Cold War is how changes in a country's defense spending will affect its economic performance. Despite the significant amount of work on the defense-growth relationship, a consensus has failed to be reached within the literature as to whether a relationship does exist, its direction, and how it should be modeled. In this dissertation, the defense-growth relationship is investigated by looking at the effect of changes in the defense sector's human capital investments on growth. After theoretically deriving a human capital based model, the model is empirically tested with U.S. data for the time period 1949 to 2009. By doing so, previous scholarship on the defense-growth relationship is advanced by contributing to the theoretical foundation and theoretically deriving a model which uniquely captures the on-the-job training that enlisted soldiers and officers receive. The results show that the sector's investments have a positive effect on the economic growth of the United States. This effect is both direct and indirect. Directly, the sector's investments influence the economy's growth rate as a form of on-the-job training. The results show that approximately 18.9\% of economic growth can be attributed to the investments.Indirectly, they influence the production of a military good, which further influences general production. According to the calibrated parameters, a 1\% increase in the military good is expected to produce a 0.034\% increase in total economic output. === A Dissertation submitted to the Askew School of Public Administration and Policy in partial fulfillment of the requirements for the degree of Doctor of Philosophy. === Fall Semester, 2011. === July 22, 2011. === defense sector, Defense spending, economic growth, military output, United States === Includes bibliographical references. === Robert J. Eger, III, Professor Directing Dissertation; Milton H. Marquis, University Representative; Frances S. Berry, Committee Member; James S. Bowman, Committee Member; David S. T. Matkin, Committee Member.