ABSTRACT
The original impetus for the research was to analyze some of the possible economic effects of a "peace dividend." This chapter investigates the impact of a 25% unilateral reduction in military spending for the United States alone, and subsequently a 25% multilateral reduction in military spending in all of the major Western industrialized and developing countries. The sectoral results, which are available from the authors on request, indicate that, while some industries may experience a larger impact from the multilateral reductions, the differences appear to be fairly small. The chapter shows that reductions in government military spending will be compensated by shifting expenditures to various components of final demand, including: nondefense government spending; private consumption; investment; and a pro rata reallocation across all nondefense sectors. J. Paul Dunne and Ron P. Smith used the econometrically based Cambridge Growth Project to calculate the impact of military spending on the UK economy.
