U.S. Troops and Foreign Economic Growth

Abstract

Do American troops help or hinder economic growth in other countries? We consider a newly constructed dataset of the deployment of U.S. troops over the years 1950–2000 and discover a positive relationship between deployed troops and host country economic growth, which is robust to multiple control variables. Each tenfold increase in U.S. troops is associated with a one–third percentage point increase in average host country annual growth. We explore three possible causal explanations: a Keynesian aggregate demand boost; the diffusion of institutions; and security. Extensive econometric testing, including the use of panel data, confirms the core relationship.