Federal Defense Spending and Metropolitan and Nonmetropolitan Disparities in Economic Growth in the Southeast*

Abstract

Objective. This study examines how defense spending in the 1980s and early 1990s affected economic growth in metropolitan and nonmetropolitan counties in the southeast.Methods. Using county‐level Census and other government data, the study employs a spatial lag regression model to predict how defense spending interacts with manufacturing growth to affect county economic growth during the business cycles of the 1980s and early 1990s, while controlling for other measures of regional processes. I supplement the regression analysis with brief case studies of five counties in this region.Results. The analysis shows that there is a positive interaction effect between federal defense spending and manufacturing growth on measures of income and employment growth. However, the interaction effects are much stronger and more consistent in metropolitan counties.Conclusion. As predicted, defense spending created regional variations in economic growth across the metropolitan‐nonmetropolitan divide in the southeast during the business cycles of the 1980s and early 1990s. Moreover, documented economic growth in nonmetropolitan counties is partly a function of spatial integration with metropolitan counties. The results have implications for current trends in defense spending.