Impacts of Military Base Closure by 56mVlC8J

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									Evaluation of the Military Base
 Realignment and Closures


                       ECON 539
                   Akane Matsuda
                 Previously
   There had been four rounds of Base
    Realignment And Closure (BRAC) in 1988,
    1991, 1993 and 1995.
                                 making more
                            available funds for top
            More Military     priority weapons
            Bases To Be
              Closed
      Process in enacting the base
                closures
Department of Defense (DOD)
→Base Realignment And Closure (BRAC)
 commission
→the President
→ Congress

   To enact new round of closures, approval
    by congress is necessary
               However
Congress have strongly opposed
 DOD’s unclear assessment of costs and
  benefits
 Strong opposition from involved local
  communities
                 Questions
   Is DOD’s assessment unclear?

   Does the military base closures have
    negative effect on involved communities?
         ~empirical study~
Possible Factors (in evaluating the
          base closures)
 Economic impacts on involved local
  communities
 Costs
  environmental cleanup and grants for
  involved communities
 Benefit
  Avoided cost derive from the closure
 Net Saving
  Cost - Benefit
    To Measure the actual economic
               impacts
 Use counterfactual assumption
  -estimate what would have happened had
  a base remained open
 Baseline= average closure counties and
  their states have the same trend growth in
  employment and per capita personal
  income
 Baseline = State growth rate
            Economic impacts
Measured by regression analysis using

1.   Job loss multiplier
     Job Loss= job loss multiplier*Shock

2.   Per capita personal Income multiplier
     Income Loss=income multiplier*Shock

           …..How are they calculated?
               First,
  compute the dependent variable
        (job/income loss)
By taking the difference between

 # of employment (income) under
 counterfactual assumption

 and

 # of actual employment (income)
        Then, multipliers are
Ratio of these differences to

independent variable,

Total # of jobs (income) loss caused by the
 closures
                  Data
 The DOD publications
  “Civilian Reuse of Former Military Bases
  1961-93” and “1988, 1991, 1993 and 1995
  BRAC Actions Base Reutilization Status”
 The database contains 57 closures that
  range from 150 to over 16,000 jobs in
  absolute size
Simple regression of Jobs lost on
Size of closure Shock at different
            Horizons
               Indications
 estimated impact is less than the direct job
  loss caused by the closures
 employment in closure counties grows
  faster than the state baseline
=evidence of indirect or induced job
  creation!
=improve worker’s employment prospect
=explain opportunity cost of land
Regressions of Jobs lost on
       Civilian Shock
(exclusion of military shock)
           Comparison
JL=.4*Shock (0)    → JL=.33*Shock
JL=.57*Shock (1)   → JL=.35*Shock
JL=.57*Shock (2)   →JL= .24*Shock
JL=.56*Shock (3)   →JL=.30*Shock
JL=.53*Shock (4)   →JL=.13*Shock
          Result and indication
   the estimated multipliers are considerable
    smaller

   indicates that the interpretation of the job
    loss impacts in the study is limited to the
    military transfers
Simple regression of income lost
  on Size of closure Shock at
       different Horizons
                 Indications
   Per capita income was little affected by the
    closure

   The closures lead to per capita income
    growth in excess of the state’s rate
           Overall Results
 the local economy would be better off
  following the military base closures
 Only on the assumption that there will be
  governmental assistance
           Mitigating factors

Such as…
 Opportunity cost of resources that bases
  occupy
 Self-correcting properties of local economy
 The effects of governmental assistance
          Problems are…
 The  study examined neither the cost
  of government assistance nor specific
  adjustment power of local economy
 The selection of the sample
  -not randomly selected
    With regard to Net Savings
 DOD’s assessment is not clear.
 Environmental cleanup and property
  transfers remain unfinished in many of the
  affected communities from previous four
  rounds
                   ↓
 Unable to assess the additional costs
   A firing range at the now-
    closed Fort Ord military
    base in Monterey County,
    Calif., is excavated to
    remove lead from spent
    bullets and casings. The
    lead is among the
    contaminants that could
    affect groundwater in
    surrounding communities.
           Overall problem
Little empirical analysis exists
 The search in EconLit found only 11
  entries for either “base closures” or
  “military bases”, and none of them are
  empirical studies (As of 2001)
                           Bibliography
   Cowan, Tadlock, and Webel Baird. 2005. “Military base closure: Socioeconomic
    Impacts.” CRS Report for Congress.
   Holman, Barry. 2001. “Military base closures Overview of Economic recovery,
    property transfer, and environmental cleanup.” United States General Accounting
    Office.
   Hooker,Mark, and Knetter Michael. 2001. “Measuring the economic effects of military
    base closures.” Economic Inquiry, 39(4):583-598.
    http://www.globalsecurity.org/military/library/report/crs/RL30051_000615.pdf
   Lockwood David. “Military Base Closure: Time for Another Round?” June 15, 2000.
    Global Security
   Poppert, Patrick, and Henry Herzog Jr. 2003. “Force reduction, base closure, and
    the indirect effects of military installations on local employment growth.” Journal of
    Regional Science, 43(3): 459-481.
   http://www.brac.gov/docs/final/Chap2IssuesforFurtherConsideration.pdf
    Chapter 2: Issues for Further Consideration
    Defense Base Closure and Realignment Commission, 2005
   http://www.calinst.org/defense/base4-5.htm
    California’s Past Base Closure Experiences and the 2005 BRAC Round
    California Institute for Federal Policy Research
    Michael Freedman and Time Ransdell, April

								
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