evaluation of the military base realignment and closures econ 539 akane matsuda

Evaluation of the Military Base Evaluation of the Military Base Realignment and ClosuresRealignment and Closures

ECON 539ECON 539

Akane MatsudaAkane Matsuda

PreviouslyPreviously

There had been four rounds of There had been four rounds of BBase ase RRealignment ealignment AAnd nd CClosure (BRAC) in losure (BRAC) in 1988, 1988, 1991, 1993 and 19951991, 1993 and 1995..

More Military More Military Bases To Be Bases To Be

ClosedClosed

making more making more available available funds funds for top for top

priority weaponspriority weapons

Process in enacting the base Process in enacting the base closuresclosures

Department of Defense (DOD) Department of Defense (DOD)

→→BBase ase RRealignment ealignment AAnd nd CClosure (BRAC) losure (BRAC) commissioncommission

→→the President the President

→ → CongressCongress

To enact new round of closures, approval To enact new round of closures, approval by congress is necessaryby congress is necessary

HoweverHowever

Congress have strongly opposed Congress have strongly opposed DOD’s unclear assessment of costs and DOD’s unclear assessment of costs and

benefitsbenefits Strong opposition from involved local Strong opposition from involved local

communities communities

QuestionsQuestions

Is DOD’s assessment unclear?Is DOD’s assessment unclear?

Does the military base closures have Does the military base closures have negative effect on involved communities?negative effect on involved communities?

~empirical study~~empirical study~

Possible Factors (in evaluating the Possible Factors (in evaluating the base closures)base closures)

Economic impactsEconomic impacts on involved local on involved local communities communities

CostsCosts environmental cleanup and grants for environmental cleanup and grants for involved communitiesinvolved communities

BenefitBenefitAvoided cost derive from the closureAvoided cost derive from the closure

Net SavingNet Saving Cost - BenefitCost - Benefit

To Measure the actual economic To Measure the actual economic impactsimpacts

Use Use counterfactual assumptioncounterfactual assumption

-estimate what would have happened had -estimate what would have happened had a base remained open a base remained open

Baseline= average closure counties and Baseline= average closure counties and their states have the same trend growth in their states have the same trend growth in employment and per capita personal employment and per capita personal income income

Baseline = State growth rateBaseline = State growth rate

Economic impactsEconomic impacts

Measured by regression analysis usingMeasured by regression analysis using

1.1. Job loss multiplierJob loss multiplierJob Loss= job loss multiplier*ShockJob Loss= job loss multiplier*Shock

2.2. Per capita personal Income multiplierPer capita personal Income multiplier Income Loss=income multiplier*ShockIncome Loss=income multiplier*Shock

……..How are they calculated?..How are they calculated?

First, First, compute the compute the dependent variabledependent variable

(job/income loss) (job/income loss) By taking the difference between By taking the difference between

# of employment (income) under# of employment (income) under counterfactual assumptioncounterfactual assumption

and and

# of actual employment (income)# of actual employment (income)

Then, multipliers areThen, multipliers are

Ratio of these differences to Ratio of these differences to

independent variable,independent variable,

Total # of jobs (income) loss caused by the Total # of jobs (income) loss caused by the closuresclosures

DataData

The DOD publicationsThe DOD publications“Civilian Reuse of Former Military Bases “Civilian Reuse of Former Military Bases 1961-93” and “1988, 1991, 1993 and 1995 1961-93” and “1988, 1991, 1993 and 1995 BRAC Actions Base Reutilization Status”BRAC Actions Base Reutilization Status”

TheThe database contains 57 closures that database contains 57 closures that range from 150 to over 16,000 jobs in range from 150 to over 16,000 jobs in absolute size absolute size

Simple regression of Jobs lost on Simple regression of Jobs lost on Size of closure Shock at different Size of closure Shock at different

HorizonsHorizons

IndicationsIndications estimated impact is less than the direct job estimated impact is less than the direct job

loss caused by the closuresloss caused by the closures employment in closure counties grows employment in closure counties grows

faster than the state baselinefaster than the state baseline

==evidence of indirect or induced joevidence of indirect or induced job b creation!creation!

=improve worker’s employment prospect=improve worker’s employment prospect

=explain opportunity cost of land =explain opportunity cost of land

Regressions of Jobs lost on Regressions of Jobs lost on Civilian ShockCivilian Shock

(exclusion of military shock)(exclusion of military shock)

ComparisonComparison

JL=.4*Shock (0)JL=.4*Shock (0)





→ → JL=.33*ShockJL=.33*Shock

→ → JL=.35*ShockJL=.35*Shock

→→JL= .24*ShockJL= .24*Shock

→→JL=.30*ShockJL=.30*Shock

→→JL=.13*ShockJL=.13*Shock

Result and indicationResult and indication

the estimated multipliers are considerable the estimated multipliers are considerable smallersmaller

indicates that the interpretation of the job indicates that the interpretation of the job loss impacts in the study is limited to the loss impacts in the study is limited to the military transfersmilitary transfers

Simple regression of income lost on Simple regression of income lost on Size of closure Shock at different Size of closure Shock at different

HorizonsHorizons

IndicationsIndications

Per capita income was little affected by the Per capita income was little affected by the closureclosure

The The closures lead to per capita income closures lead to per capita income growth in excess of the state’s rate growth in excess of the state’s rate

Overall ResultsOverall Results

the local economy would be better off the local economy would be better off following the military base closures following the military base closures

Only Only on the assumptionon the assumption that there will be that there will be governmental assistancegovernmental assistance

Mitigating factors Mitigating factors

Such as…Such as… OOpportunity cost of resources that bases pportunity cost of resources that bases

occupyoccupy Self-correcting properties of local economySelf-correcting properties of local economy The effects of governmental assistanceThe effects of governmental assistance

Problems are…Problems are…

TThe study examined neither the cost he study examined neither the cost of government assistance nor specific of government assistance nor specific adjustment power of local economy adjustment power of local economy

TThe selection of the samplehe selection of the sample

-not randomly selected-not randomly selected

With regard to Net SavingsWith regard to Net Savings

DOD’s assessment is not clear.DOD’s assessment is not clear. Environmental cleanup and property Environmental cleanup and property

transfers remain unfinished in many of the transfers remain unfinished in many of the affected communities from previous four affected communities from previous four roundsrounds

↓ ↓ Unable to assess the additional costsUnable to assess the additional costs

A firing range at the now-A firing range at the now-closed Fort Ord military closed Fort Ord military base in Monterey County, base in Monterey County, Calif., is excavated to Calif., is excavated to remove lead from spent remove lead from spent bullets and casings. The bullets and casings. The lead is among the lead is among the contaminants that could contaminants that could affect groundwater in affect groundwater in surrounding communities.surrounding communities.

Overall problemOverall problem

LLittle empirical analysis existsittle empirical analysis existsTThe search in EconLit found only he search in EconLit found only 1111

entries for either “base closures” or entries for either “base closures” or “military bases”, and “military bases”, and nonenone of them are of them are empirical studies empirical studies (As of 2001)(As of 2001)

BibliographyBibliography Cowan, Tadlock, and Webel Baird. 2005. “Military base closure: Socioeconomic Cowan, Tadlock, and Webel Baird. 2005. “Military base closure: Socioeconomic

Impacts.” CRS Report for Congress. Impacts.” CRS Report for Congress. Holman, Barry. 2001. “Military base closures Overview of Economic recovery, Holman, Barry. 2001. “Military base closures Overview of Economic recovery,

property transfer, and environmental cleanup.” United States General Accounting property transfer, and environmental cleanup.” United States General Accounting Office.Office.

Hooker,Mark, and Knetter Michael. 2001. “Measuring the economic effects of military Hooker,Mark, and Knetter Michael. 2001. “Measuring the economic effects of military base closures.” Economic Inquiry, 39(4):583-598.base closures.” Economic Inquiry, 39(4):583-598.

http://www.globalsecurity.org/military/library/report/crs/RL30051_000615.pdfhttp://www.globalsecurity.org/military/library/report/crs/RL30051_000615.pdf Lockwood David. “Military Base Closure: Time for Another Round?” June 15, 2000. Lockwood David. “Military Base Closure: Time for Another Round?” June 15, 2000.

Global SecurityGlobal Security Poppert, Patrick, and Henry Herzog Jr. 2003. “Force reduction, base closure, and Poppert, Patrick, and Henry Herzog Jr. 2003. “Force reduction, base closure, and

the indirect effects of military installations on local employment growth.” Journal of the indirect effects of military installations on local employment growth.” Journal of Regional Science, 43(3): 459-481.Regional Science, 43(3): 459-481.

http://www.brac.gov/docs/final/Chap2IssuesforFurtherConsideration.pdfhttp://www.brac.gov/docs/final/Chap2IssuesforFurtherConsideration.pdf

Chapter 2: Issues for Further ConsiderationChapter 2: Issues for Further Consideration

Defense Base Closure and Realignment Commission, 2005Defense Base Closure and Realignment Commission, 2005 http://www.calinst.org/defense/base4-5.htmhttp://www.calinst.org/defense/base4-5.htm

California’s Past Base Closure Experiences and the 2005 BRAC RoundCalifornia’s Past Base Closure Experiences and the 2005 BRAC RoundCalifornia Institute for Federal Policy Research California Institute for Federal Policy Research Michael Freedman and Time Ransdell, AprilMichael Freedman and Time Ransdell, April

evaluation of the military base realignment and closures econ 539 akane matsuda

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