War and regional economic growth: winners and losers

Abstract

Using an AK-type model this article argues that joining the Armed Forces may have two opposing effects on the growth rates of economically depressed areas depending upon whether the country goes to war or not. On the one hand when individuals from relatively economically depressed areas join the Armed Forces, they gain access to education and build human capital which may translate into economic growth. On the other hand, however, if the country goes to war, these regions may end up losing their labour force, leading to a decline in the growth rate. We also argue that regions providing equipment may experience increased income and employment levels.

Notes

¹ Please visit, among other sources, Bureau of Navel Personnel for information and a history of Montgomery GI Bill at http://www.npc.navy.mil/CareerInfo/Education/GIBill/GIBillHistory.htm

² Since there is a rich body of literature on the development of AK-type models, here we only present the salient features of the model and refer the curious readers to Aghion and Howitt (1998, Sections 1.4 and 1.5), for details.

³ Note also that the less-developed regions may further suffer due to a lack of learning-by-doing — less doing because of labour force gone to war and hence less learning.

⁴ We also control for the city/town unemployment rate.