The Review of Economics and Statistics Vol. 45 No. 3 1963
Military Expenditures and the Employment Multiplier in Hawaii
Abstract
FEDERAL spending to maintain defense establishments and personnel is an important segment of the Hawaiian economy. Some idea of the magnitude and relative importance of this can be seen if we look at a breakdown of Hawaii's income from the mainland.' In I959, Hawaii earned $953 million in mainland dollars. Of this amount, $338 million, or 35 per cent, was in military expenditures.2 The importance of defense spending is also reflected in the data on employment shown in Table i. This table shows that the defense sector accounted for i8.i and 32.8 per cent of total employment in Hawaii in I939 and I955.3 This study was conducted to obtain a quantitative measure of the economic impact of changes in military spending on the Hawaiian economy. Findings as a result of this research and detailed support of them are presented below. The measure derived is the employment multiplier. This shows the change in the total employment of an economy which results from a change in the number employed in one sector of the economyin our case, changes in the defense sector. The employment multiplier was computed rather than the related and more commonly used measure, the income multiplier. The latter, which describes the change in income due to changes in expenditures in one sector of the economy, was not computed because certain data necessary to derive the income multiplier were not available in Hawaii. It will be shown that an increase in the number employed in the defense sector of IOO employees will lead to a further increase in total employment in Hawaii of 28 employees. That is, the employment multiplier for Hawaii is I.28. One can only conclude from this that the total level of employment in Hawaii is significantly affected by changes in the level of employment in the defense sector. We also find that there is little time lag between changes in military expenditures and induced changes in total employment. This is to say that the effect of an increase or decrease in defense spending on the over-all economy is mostly felt within one year from the time the initial change occurs.
- DOI
- 10.2307/1923901
- Volume
- 45
- Issue
- 3
- Pages
- 298
- Sources
- openalex crossref