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First Spring Meeting: Consortium on the American Political Economy Junior Working Group (CAPE-JWG)

First Consortium on the American Political Economy Junior Working Group (CAPE-JWG) meeting. Nick Short of Princeton will present "The DARPA Effect: How Defense Spending Shaped Knowledge Economy Development in the United States."

Abstract: Economic theory suggests that the federal government plays a marginal role in causing some regions to become technological leaders while historical scholarship suggests the opposite. We test the validity of the historical perspective using an instrumental variables approach that leverages fine-grained defense procurement data from 1966-2000. Early results suggest that, consistent with the historical perspective, defense spending during the Reagan-era buildup played a significant role in causing some regions to become technological leaders. We then evaluate the political implications of this finding. We find that the same defense spending shock ironically caused some regions to favor Democratic presidents by higher margins. In ongoing work, we plan to test two potential mechanisms linking regional innovation and Democratic partisanship: the effect on the electorate (i.e. defense spending attracting more educated workers to an area) and the effect on local government finance (i.e. defense spending increasing local revenue and expenditures).

Jan 18, 2023 03:00 PM in Eastern Time (US and Canada)