The Role of Federal Military Spending in the Timing of the New England Employment Turnaround

Abstract

This paper examines the role of military spending in the recent economic revival of New England, particularly the region's turnaround in employment growth. The long‐term re structuring of New England's economy after World War II in terms of industry mix and labor costs positioned the region for a turnaround. We argue that the precipitating factor in the liming of the was the significant increase starling in the late 1970s in federal military purchases of durable goods from [lie region's high‐technology manufacturing industry. New England benefited disproportionately from the military buildup because of the region's concentration in high‐technology manufacturing industries producing defense‐related goods. The labor‐intensive nature of high‐technology industry has resulted in a large portion of the money received from defense purchases going to labor and producing important regional multiplier effects in sectors other than manufacturing.