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 There had been four rounds of Base Realignment And Closure (BRAC) in 1988, 1991, 1993 and More Military Bases To Be Closed making more available funds for top priority weapons

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~ ~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 -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 Income Loss=income multiplier*Shock …..How are they calculated? …..How are they calculated?

First, compute the dependent variable (job/income loss) By taking the difference between # of employment (income) under counterfactual assumption and and # of actual employment (income) # 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 ” 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=.57*Shock (1) JL=.57*Shock (2) JL=.56*Shock (3) JL=.53*Shock (4) → JL=.33*Shock → JL=.35*Shock →JL=.24*Shock →JL=.30*Shock→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 -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. 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) 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 “Military base closure: Socioeconomic Impacts.” CRS Report for Congress. Cowan, Tadlock, and Webel Baird “Military base closure: Socioeconomic Impacts.” CRS Report for Congress. Holman, Barry “Military base closures Overview of Economic recovery, property transfer, and environmental cleanup.” United States General Accounting Office. Holman, Barry “Military base closures Overview of Economic recovery, property transfer, and environmental cleanup.” United States General Accounting Office. Hooker,Mark, and Knetter Michael “Measuring the economic effects of military base closures.” Economic Inquiry, 39(4): Hooker,Mark, and Knetter Michael “Measuring the economic effects of military base closures.” Economic Inquiry, 39(4): Lockwood David. “Military Base Closure: Time for Another Round?” June 15, Global Security Lockwood David. “Military Base Closure: Time for Another Round?” June 15, Global Security Poppert, Patrick, and Henry Herzog Jr “Force reduction, base closure, and the indirect effects of military installations on local employment growth.” Journal of Regional Science, 43(3): Poppert, Patrick, and Henry Herzog Jr “Force reduction, base closure, and the indirect effects of military installations on local employment growth.” Journal of Regional Science, 43(3): Chapter 2: Issues for Further Consideration Defense Base Closure and Realignment Commission, California’s Past Base Closure Experiences and the 2005 BRAC Round California Institute for Federal Policy Research Michael Freedman and Time Ransdell, April