Military Spending and Economic Well-Being in the American States:
The Post-Vietnam War Era
ABSTRACT
Considering the post-Vietnam period from 1978-2003, this paper investigates whether military spending
improves or worsens the economic well-being of citizens within the 50 American states. We test two
competing perspectives that predict opposite effects of military spending on economic well-being. The
military displacement perspective suggests that military spending competes with and displaces more
beneficial private investment and causes adverse effects on the economy. On the other hand, the military
Keynesianism argument suggests that state managers uses military spending as a countercyclical tool to
reduce the deleterious effects of economic downturns and that its effects on the economy are generally
positive. Using state-level, longitudinal data we find support for the military Keynesianism argument.
Several implications of these findings are discussed.