Some Economic Effects of Unilateral and Multilateral Reductions in Military Expenditures in the Major Industrialized and Developing Countries

Abstract

We use the Michigan Model of World Trade and Production to assess the sectoral effects on the U.S. economy of: (1) a 25% unilateral reduction of military expenditures in the United States and (2) a 25% multilateral reduction of military expenditures in all of the major Western industrialized and developing countries included in the Michigan Model. Our principal findings suggest that the overall effects are not substantial. Although the sectoral results differ significantly depending on the alternative assumptions concerning compensating macroeconomic policies, less than 1.0% of the workforce might experience dislocation in all cases. The results of the multilateral reduction are qualitatively similar to those of a unilateral reduction.

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