Does defence expenditure affect private consumption? Evidence from the United States

This paper empirically discusses the relationship between government defence expenditure and private consumption for the United States. The estimations show a substitution or complementary effect of the military sector on private categories of consumer choices, although sensitivity analysis for different utility functions and sub-samples indicates a time-decrease on substitutability. Our findings are in line with previous results highlighting a weak substitution of defence expenditure on aggregate consumption. (C) 2009 Elsevier B.V. All rights reserved.