Journal Article

Reduced defense purchasing: anticipating the impact on state and industry employment

Abstract: Despite Iraq's invasion of Kuwait, budgetary pressures in the United States make significant cuts in defense purchasing seem inevitable. Lori L. Taylor analyzes the employment consequences of cutting billions of dollars in defense purchasing. She finds that while certain industries and areas would experience some economic difficulties, job losses would be negligible nationwide. ; Taylor estimates the near-term and long-term effects of a 10-percent cut in real defense purchasing. Using input-output analysis, she determines which industries are defense dependent and identifies the impact on employment in each industry. She finds that all industries would lose some employment, but that job losses in certain defense- dependent industries could reach 7.5 percent. Taylor estimates that over time, however, labor displaced by defense cuts would be reabsorbed by other industries. She also finds that all states would lose at least a few jobs in the near term, but that no state would lose more than 0.5 percent of its employment if real defense purchasing declined by 10 percent. Taylor estimates that no state would gain more than 0.35 percent of its employment nor lose more than 0.25 percent of its employment in the long term.

Keywords: Defense contracts; Employment (Economic theory);

Bibliographic Information

Provider: Federal Reserve Bank of Dallas

Part of Series: Economic and Financial Policy Review

Publication Date: 1990

Issue: Nov

Pages: 17-27