Ruhr Economic Papers

Ruhr Economic Papers #181

The Regional Economic Effects of Military Base Realignments and Closures in Germany

by Alfredo Paloyo, Colin Vance and Matthias Vorell

RWI, RGS Econ, RUB, 04/2010, 21 S./p., 8 Euro, ISBN 978-3-86788-203-3

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Abstract

Within the context of the current political discussion over base realignments and closures (BRACs) in Germany, this study provides policy guidance by examining the economic consequences to the surrounding community. We identify the causal effect of a reduction in military personnel on a number of socioeconomic indicators within the peripheries of military bases. The BRACs within the German armed forces is used an exogenous source of variation that allows for the estimation of the causal effect of a particular demand shock on household income, output, unemployment, and tax revenue within a specified buff er zone around each base. The analysis covers 298 communities for the period 2003–2007. Consistent with evidence found elsewhere, we find that these base adjustments have only a marginal impact on the local community in which the bases are located.

JEL-Classification: H56, K42, R19

Keywords: Geographic information system; armed forces; regional adjustment

Published as:

Paloyo, A., C. Vance and M. Vorell (2010), The Regional Economic Effects of Military Base Realignments and Closures in Germany. Defence and Peace Economics 21 (5-6): 567-579.

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