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The Role of Defense Cuts in the California Recession: Computable General Equilibrium Models and Interstate Factor Mobility

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  • Hoffman, Sandra
  • Robinson, Sherman
  • Subramanian, Shankar

Abstract

This study develops a computable general equilibrium (CGE) model to examine the impact of recent defense cuts on California's economy. The study demonstrates use of a CGE model to examine the sensitivity of regional economy models to assumptions about factor migration. The results show that California is indeed sensitive to defense cuts, but that the perceptions of workers and producers about the permanency of the cuts and about other future opportunities in the state economy significantly affect gross state product (GSP) multipliers. Depending on how these perceptions affect factor migration, GSP multipliers can be expected to range from 1 to almost 5.

Suggested Citation

  • Hoffman, Sandra & Robinson, Sherman & Subramanian, Shankar, 1995. "The Role of Defense Cuts in the California Recession: Computable General Equilibrium Models and Interstate Factor Mobility," CUDARE Working Papers 201475, University of California, Berkeley, Department of Agricultural and Resource Economics.
    • Handle: RePEc:ags:ucbecw:201475
    DOI: 10.22004/ag.econ.201475
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    3. David W. Roland-Holst, Sherman Robinson and Laura D'Andrea Tyson., 1988. "The Opportunity Cost of Defense Spending: A General Equilibrium Analysis," Economics Working Papers 8871, University of California at Berkeley.
    4. Hanson, Kenneth A. & Robinson, Sherman, 1989. "Data, Linkages, And Models: U.S. National Income And Product Accounts In The Framework Of A Social Accounting Matrix," Staff Reports 278155, United States Department of Agriculture, Economic Research Service.
    5. Devarajan, Shantayanan & Lewis, Jeffrey & Robinson, Sherman, 1990. "Policy Lessons from Two-Sector Models," CUDARE Working Papers 198566, University of California, Berkeley, Department of Agricultural and Resource Economics.
    6. Michelle R. Garfinkel, 1990. "The economic consequences of reducing military spending," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 47-58.
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    9. Devaragan, Shantayanan & Lewis, Jeffrey D. & Robinson, Sherman, 1990. "Policy lessons from trade-focused, two-sector models," Journal of Policy Modeling, Elsevier, vol. 12(4), pages 625-657.
    10. Markusen, Ann & Hall, Peter & Campbell, Scott & Deitrick, Sabina, 1991. "The Rise of the Gunbelt: The Military Remapping of Industrial America," OUP Catalogue, Oxford University Press, number 9780195066487.
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    12. Robinson, Sherman & Hoffmann, Sandra & Subramanian, Shankar, 1994. "Defense Spending Reductions and the California Economy: A Computable General Equilibrium Model," CUDARE Working Papers 198633, University of California, Berkeley, Department of Agricultural and Resource Economics.
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    Cited by:

    1. Konan, Denise Eby, 2011. "Limits to growth: Tourism and regional labor migration," Economic Modelling, Elsevier, vol. 28(1), pages 473-481.
    2. Berck, Peter & Costello, Christopher & Hoffman, Sandra & Fortmann, Louise, 1999. "Poverty program participation and employment in timber-dependent counties," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt9c19v6jg, Department of Agricultural & Resource Economics, UC Berkeley.
    3. Harris, Thomas R. & Seung, Chang K. & Darden, Tim D. & Riggs, William W., 2002. "Computable General Equilibrium Modeling Of Rangeland Fires In Northern Nevada," 2002 Annual Meeting, July 28-31, 2002, Long Beach, California 36640, Western Agricultural Economics Association.
    4. Elena G. Irwin & Andrew M. Isserman & Maureen Kilkenny & Mark D. Partridge, 2010. "A Century of Research on Rural Development and Regional Issues," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(2), pages 522-553.
    5. Hoffmann, Sandra & Berek, Peter & Costello, Christopher & Fortmann, Louise, 2000. "Poverty and Employment in Timber-Dependent Counties," RFF Working Paper Series dp-00-52, Resources for the Future.
    6. David Holland & Abdul Razack, 2006. "Assessing the Economic Impact of an Agricultural Export Shock on the Washington Economy: A Tale of Two Models," Working Papers 2006-11, School of Economic Sciences, Washington State University.
    7. Bilgic, Abdulbaki & King, Stephen A. & Lusby, Aaron K. & Schreiner, Dean F., 2002. "Estimates of U.S. Regional Commodity Trade Elasticities of Substitution," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 32(2), pages 1-20.
    8. Byers, Steven & Cutler, Harvey & Davies, Stephen P., 2004. "Estimating Costs and Benefits of Economic Growth: A CGE-Based Study of Tax Incentives in a Rapidly Growing Region," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 34(4), pages 1-20.
    9. Peter Berck & Sandra Hoffmann, 2002. "Assessing the Employment Impacts of Environmental and Natural Resource Policy," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 22(1), pages 133-156, June.
    10. Malik, R. P. S., 2008. "Growth impacts of development and management of water resources," Conference Papers h042935, International Water Management Institute.
    11. George W. Hammond & Eric Thompson, 2006. "Convergence and Mobility: Personal Income Trends in U.S. Metropolitan and Nonmetropolitan Regions," International Regional Science Review, , vol. 29(1), pages 35-63, January.

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    Production Economics; Public Economics;

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