Federal investments and economic stimulus at the end of the Cold War: the influence of federal installations on employment growth, 1970 -1990

 
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Environment and Planning A 1998, volume 30, pages 1695-1704

Federal investments and economic stimulus at the end
of the Cold War: the influence of federal installations
on employment growth, 1970 -1990

G H o o k s l V Getz
Department of Sociology, Washington State University, Pullman, WA 99164-4020, USA;
e-mail: hooks@mail.wsu.edu; vgetz@mail.wsu.edu
Received 27 September 1996; in revised form 8 July 1997

Abstract. A growing body of evidence points toward the distinctiveness of the state's political and
military policies and of the impact of these policies on economic processes. Regional scientists have
been stressing the importance of new industrial districts, with an emphasis on interfirm relationships
and the regional economy in which firms are embedded. In this paper, we document the state's role in
regional growth and offer a reminder of the external and political actors which have influenced growth
of industrial districts. We have acquired information from the US General Services Administration on
each piece of property owned by the United States, including data on the agency controlling the
installation and the functions performed at this location. Our examination of employment growth from
1970 to 1990 provides evidence that federal installations did stimulate growth in the regions in which
they were located. More specifically, we find that NASA installations and the military's industrial
facilities exerted a positive influence on employment growth over the period. However, despite the
large budgets commanded by Department of Energy installations and their highly educated labor force,
we found that the Department of Energy installations inhibited employment growth.

Introduction
In this paper we explore the federal government's contribution to local economic
growth in recent years. This research builds on and contributes to a long tradition
that has examined the regional economic impact of military spending. This intellectual
tradition has provided evidence that the "spatial distribution of federal expenditures in
the United States is a major factor in the regional restructuring that is reshaping the
economic system of the nation" ( C r u m p , 1989, page 50). The strong variant of this
claim suggests that "state-supported military spending" is the principal "means
through which new development and modernization has taken place", and that this
spending "represents a direct, spatial transfer of value effected by the state" (Gottdiener,
1990, page 392). A number of scholars provide evidence that state spending, especially
military outlays, has played an i m p o r t a n t role in regional transformation (Hooks, 1994;
Hooks and Bloomquist, 1992; Kirby, 1992a; 1992b; Lovering, 1990; Malecki, 1982;
Markusen, 1986; Markusen et al, 1991). The quality of our data is superior in two
respects: (1) our data set includes all federal properties, military and civilian, thereby
permitting a contrast between different types of federal properties; (2) these data are
specific to metropolitan statistical areas (MSAs), thereby avoiding reliance on state-
level procurement summaries to estimate governmental activities in local areas.
    This research also offers a refinement to the literature on new industrial districts.
In place of mechanistic conceptions of regional economies and an exaggeration of
external factors, this tradition has stressed endogenous factors that mold economic
activity, with a special interest in local networks of cooperation and competition in
which firms are embedded (for example, see Piore and Sabel, 1984; Scott, 1988; 1992;
1993; Storper, 1989). Recent research offers a forceful reminder that, despite the value
of exploring interfirm relations (especially relations a m o n g smaller firms), larger firms
1696                                                                       G Hooks, V Getz

and the state can limit and influence the path of local economic development. Park and
Markusen (1995) provide evidence that the 'developmental state' played a prominent
role in creating and guiding vibrant regional economies in Korea. In his examination
of the Silicon Valley, Harrison (1994) concluded that inequality and external influences
played an integral role in the growth of this economy. Specific to the present concerns,
Harrison (1994, page 322) contends that the Department of Defense played a decisive
role in financing the development of the microelectronics industry and in concentrating
that industry in the Silicon Valley.
    We bring to this debate unprecedented detail on the state's presence and contribution
to economic growth, and a panel study that includes each MSA. We have collected data
on real property in the possession of the federal government in 1970, 1980, and 1990
(GSA, 1983). A panel study examines the consequences of federal property ownership on
employment growth over the 1970-90 period. Many of the properties owned by the
federal government were acquired during World War 2, controlled by national security
agencies, and employed for military purposes (Hooks, 1994; Hooks and Bloomquist,
 1992). In this sense, this research examines the legacy of warmaking and the conse-
quences of maintaining a war footing in the waning decades of the Cold War. The
comprehensive and detailed nature of our study allows us to examine carefully the
proposition that industrial spaces are molded by the state's presence and activities,
especially its national security efforts.

Industrial districts in the hegemonic nation
This research builds upon and extends to the regional sciences the theoretical arguments
advanced by Mann (1986) and Tilly (1990) concerning the state's distinctive political and
military policies, and the impact of these policies upon domestic economic processes.
The regional sciences have often assumed that the distribution of the state's investments
and procurement followed, or could be derived from, commercial processes external to
the state. Markusen et al (1991, pages 26-27) criticize this "old-fashioned geographical
location theory" for denying that the state, especially its military policies, has influenced
regional growth and for assuming that the state's investments have been determined by
commercial processes. They argue that the most important factors in the location of
military bases and defense industries have been "the United States' mission, the vision
the president and Pentagon top brass share about the nation's global role. As this
vision has changed—from isolationism to global conflict to cold war—so has the basic
philosophy of the right strategic response. The defense of coasts was replaced by
strategic bombing, then by intercontinental missilery, and finally by Star Wars".
    The suggestion that regional processes are molded by economic, political, and
military use of space may seem novel from an economistic theory of regional growth.
However, this view has figured prominently among those concerned with "the geographic
dimension of history" (Fox, 1971, page 19; see also Genovese and Hochberg, 1989). Fox
(1971) contrasted waterborne and overland transportation in preindustrial Europe.
Commerce-oriented cities developed along coasts and internal waterways; the efficiency
and low cost of waterborne transport made this economic development possible. In
turn, the social organization of these cities was molded by their commercial orienta-
tion. Although the state emerged in the same period, it was not founded upon these
commercially oriented cities. The state, which emerged from the land-based feudal
system, built and maintained a ground transportation network to meet military objec-
tives—to pacify internal regions and defend frontiers from external threats. Although
cost considerations were important, strategic imperatives induced the state to invest in
and maintain an expensive overland transportation network [see also van Creveld
The influence of federal installations on employment growth, 1970 - 1990              1697

(1989) on the state's role in building and maintaining telegraph and railroad arteries in
the nineteenth century].
     In early modern Europe, Fox (1971) identified separate transportation maps, one
used for commerce and a second for military purposes. In the contemporary period,
the state and economic actors use similar transportation technologies and occupy the
same geographical space. Nevertheless, distinct economic, political, and military
dynamics mold the use of space and the processes of regional growth and decline
(Hooks, 1994). It should come as no surprise to discover that states—especially their
national security efforts—influence regional processes. By definition, states are con-
cerned with geography, they fight wars to defend the territory over which they claim
dominion, and "preparation for war has been the great state building activity" (Tilly,
 1975, page 74; see also Mann, 1986; Tilly, 1990). By placing emphasis on the state's
presence and contributions to contemporary regional economies, this research offers
an important reminder that industrial districts are influenced by the geopolitical
ambitions of states and by the demands placed on local economies by national states.
     Previous research suggests that federal investments played a direct and significant
role in the growth of manufacturing activity in the early postwar period (Hooks, 1994;
Hooks and Bloomquist, 1992). Most of these manufacturing facilities were acquired
during the total economic mobilization for World War 2 (Hooks, 1991; 1993). After
selling off most civilian assets in the late 1940s, nearly all of the federal government's
manufacturing assets were in the defense industries and retained for the production of
 armaments (Hooks, 1991; Hooks and Bloomquist, 1992). The defense program since the
 Vietnam War has emphasized aeronautics, communications, and electronics (especially
 microelectronics) (Markusen and Yudken, 1992). Many of the federal government's
 manufacturing assets from the World War 2 era are in defense industries associated
 with an earlier era of mass-industrial warfare, such as shipbuilding, ordnance, and
 ammunition (Gansler, 1980; Milward, 1977). Although it is anticipated that federal
 industrial assets have stimulated growth in recent years, the extent of this economic
 stimulus is expected to be modest because these traditional defense industries grew
 slowly in the latter years of the Cold War (Hooks and McLauchlan, 1992).
      Regions in which science-intensive industries and R&D activities have been con-
 centrated have experienced rapid economic growth, especially in recent decades
 (Castells, 1985; Gross and Weinstein, 1986; Markusen et al, 1986; Rees, 1986; Weinstein
 et al, 1985). There is considerable dispute over the state's contribution to concentrating
 these high-tech activities in a region. Vaughan and Pollard (1986, page 270) assert that
 the state "played only a minor and passive role in the location and development of the
 first high-tech centers" and doubt that the federal government will play a significant
 role in future high-tech centers. Although he acknowledges the federal government's
 important role, Malecki (1986, page 63; see also Malecki, 1982) cautions that "federally
 funded R&D, either at government laboratories or firms and universities, is alone
 probably not sufficient to spawn wide ranging technology-based growth". However,
 many authors believe that because of their "dependence on government markets,
 particularly on the military and space programs and especially until the late 1960s,
 high tech activities tend to cluster historically in regions where the military has
 established its testing sites" (Castells, 1985, page 13; see also Markusen, 1986; Markusen
 et al, 1986). Research and development has contributed to the growth of high-wage
 employment, and federal procurement has been channeled toward scientific activity.
 In the 1980s, owing to the high investment in the Strategic Defense Initiative, federal
 funding flowed into national security installations. For these reasons, we anticipate
 that research and development facilities controlled by national security agencies were
 strongly associated with employment growth.
1698                                                                      G Hooks, V Getz

Data and methods
Because of a lack of alternative data, most previous research into the federal contribution
to regional growth has emphasized military activity and has relied on state-level procure-
ment summaries provided by the Department of Defense. Only in the 1970s, with the
emergence of the controversy over the federal contribution to the rise of the Sunbelt
{Business Week, 1976, Sale, 1975;), did the federal government begin to provide more
complete information. At best, federal reports on defense contracts identify where the
payment was received, but they do not disclose where the funds were actually spent
(Browning, 1981, pages 132-133; Rees, 1981, pages 198-199). This problem is com-
pounded because defense outlay data report only on prime contracts and do not
indicate where subcontracting occurs (Rees, 1981, page 201). The data collected for
this research identify with much greater precision the location of federal facilities.
Whereas the allocation of procurement contracts may vary from year to year, the
state's command, administrative, industrial, and R&D infrastructures represent an
enduring state intervention in a local economy. Our research design has the additional
advantage of measuring investments both in civilian and in defense activities. The
state's civilian activities have been all but ignored. However, the federal government
has made sizable investments in civilian laboratories, prisons, hospitals, and a host of
administrative offices. By including both defense and civilian properties, this research
design makes it possible to disentangle the effects of federal defense investments from
investments in civilian activities.
     For this research, data have been collected at the county level. However, because
the county is an administrative unit that does not conform to regional economic and
residential patterns, these data have been aggregated to the level of metropolitan
statistical areas (MSAs). The General Services Administration (GSA) has been
charged with maintaining records on all federal property. Since 1954, the GSA has
collected data on federal properties in systematic fashion and has produced on an
annual basis the Detailed Listing of Real Property Owned by the United States, which
 includes information on all non-secret installations (with the exception for much of
 the period of the Central Intelligence Agency). For each federal installation, the GSA
 (1983, page ii) reports the agency controlling the facility and the function performed
 (see below).
     The dependent measure for this research is growth in employment. Employment
 data were taken from the Census of Population, which provides valid data for each
 county on the dependent measure in 1970, 1980, and 1990. The disadvantage of this
 source is that the reporting years do not coincide with the more interesting historical
 turning points. The 1980 Census reports on the situation in 1979, and the 1990 Census
 refers to 1989. The first reporting year provides information on employment prior to
 the Reagan-era military buildup, and the second reporting year (1989) reflects the
 decline of the Strategic Defense Initiative and the initial tailing off of defense outlays
 as the Cold War neared its end. Every effort has been made to develop variables which
 best represent theories of regional processes. Measures have been taken from a variety
 of sources and, if at all possible, at the appropriate territorial level (see Hooks, 1994;
 Hooks and Bloomquist, 1992).

Overview of federal property ownership
The GSA reports employed for this research provide information on the functions
performed and the agency controlling each installation. On the basis of preliminary
analyses, we aggregated these detailed reports to four functions [industrial, R&D,
office, and miscellaneous (all other functions)] and four agencies [Department of
Defense (DOD), Department of Energy (DOE), National Aeronautics and Space
The influence of federal installations on employment growth, 1970 -1990                 1699

Table 1. Factor analysis of federal property ownership in 1970, principal component factors,
varimax rotation, 310 metropolitan statistical areas.

                     Factor 1         Factor 2     Factor 3      Factor 4        Uniqueness
                     miscellaneous    DOE          NASA          DOD
                                                                 manufacturing

Eigenvalue           5.52             3.10          2.55         1.04
Department of Defense (DOD)
 office             0.88              0.06          0.10         0.30            0.12
 R&D                0.84              0.01          0.24         0.10            0.23
 industrial         0.17              0.00          0.00         0.86            0.24
 miscellaneous      0.55              0.08          0.06         0.51            0.43
National Aeronautics and Space Administration (NASA)
 office              0.05        -0.01           0.94             0.02           0.12
 R&D                 0.36        -0.01           0.73           -0.08            0.33
 industrial        —0.03         -0.01           0.84             0.10           0.28
 miscellaneous       0.18        -0.00           0.91             0.02           0.14
Department of Energy (DOE)
 office            0.29               0.91          0.00        -0.01            0.09
 R&D              -0.02               0.81        -0.02           0.19           0.31
 industrial       -0.04               0.82          0.00        -0.12            0.31
 miscellaneous    —0.03               0.96        -0.00           0.01           0.08
Miscellaneous civilian agencies
 office               0.95             0.06         0.07          0.02           0.08
 R&D                  0.93             0.05         0.05        -0.09            0.12
 industrial           0.66           -0.01        -0.03           0.09           0.56
 miscellaneous        0.69             0.09         0.20          0.35           0.36

Administration (NASA), and miscellaneous civilian agencies]. To identify the spatial
concentration of federal installations, we performed factor analysis (table 1) on these 16
variables (4 agency groupings by 4 functions).
    Table 1 provides clarification in several respects but is inconclusive on others. A
large and heterogeneous set of properties load on the first factor, including properties
controlled by miscellaneous civilian agencies and DOD laboratories and offices. It is
likely that the loadings on the first factor result from aggregation to the MSA level.
The remaining three factors are more revealing. The loadings on factor 2 suggest that
DOE installations tend to be highly concentrated, and other agencies have relatively
few facilities in the MSAs in which DOE facilities are concentrated. In similar fashion,
factor 3 points toward the high concentration of NASA facilities. Industrial facilities
owned by DOD, and DOD's miscellaneous facilities, are associated with the fourth
factor. DOD industrial and miscellaneous facilities are strongly associated and are
referred to as 'DOD manufacturing' on table 1.
    We constructed the following groupings of federal property: miscellaneous civilian,
DOE (all functions), NASA (all functions), and military industrial facilities (DOD
industrial and miscellaneous). Table 2 (see over) identifies MSAs in which these
installations are concentrated. The highest concentration of civilian installations is
in Washington DC, the center of government and sixth largest in population. The
remaining metropolitan areas are leading population centers. The two largest DOE
installations, [Knoxville (Oakridge) and Richland - Kennewick - Pasco (Hanford, WA)],
manufactured nuclear weapons. The next three centers [Chicago (Argonne), Santa Fe
(Los Alamos), and Oakland (Lawrence - Livermore)] house national laboratories.
1700                                                                              G Hooks, V Getz

Table 2. Centers of federal property ownership in 1970, by agency and function with area in
millions of square feet.

Rank Miscellaneous             Department            National Aeronautics       Military industrial
     civilian                  of Energy             and Space                  and miscellaneous
                                                     Administration             facilities

1      Washington,     84.9    Knoxville     18.5     Melbourne -       5.3     Washington,     39.3
        DC                                             Palm Bay, FL               DC
2      New York        22.6    Richland -  5.2        Huntsville, AL    3.8     San Antonio     34.8
        City                   Kennewick -
                               Pasco, WA
3      Los Angeles     15.3    Chicago     4.0        New Orleans       3.7     San Diego       33.2
4      Chicago         14.3    Santa Fe    4.0        Houston           2.6     Philadelphia    23.5
5      Boston          11.5    Oakland     3.7        Los Angeles       2.5     Oakland         22.7

NASA installations were concentrated in Melbourne-Palm Bay (Cape Canaveral),
Huntsville, New Orleans, Houston, and Los Angeles. The military's industrial and
miscellaneous installations were concentrated in Washington DC, San Antonio, San
Diego, Philadelphia, and Oakland. (1)

Analyses of employment growth 1970 -1990
This study employs a panel design to analyze the role of federal investments on
employment growth between 1970 and 1990. These analyses explore the determinants
of the first-order difference between the dependent measure over time. Federal property
ownership devoted to the various agencies and functions (measured in square feet) is
not normally distributed. The majority of MSAs have no property devoted to a given
federal activity and a handful of MSAs reported a very large value for this measure.
Preliminary analyses provided evidence that this skewed distribution resulted in hetero-
skedastic disturbances. A log transformation is an attractive choice for addressing
heteroskedasticity. However, as the majority of raw values were 0, the log transforma-
tion is undefined, and to impute a value for these cases is ultimately arbitrary. For
these reasons, the square root of federal property ownership was employed for these
analyses.
    When regions are the unit of analyses, spatial autocorrelation may bias the results
(Land and Deane, 1992; Odland, 1988). Because of the extraordinary computational
requirements of employing maximum likelihood estimates, it has been impossible to
control for spatial autocorrelation when the sample size is large. However, Land and
Deane (1992, see also Land et al, 1991) have developed a two-stage least squares
estimator that is computationally efficient and produces results similar to maximum
likelihood estimates. To calculate the spatial effects term "each place is treated succes-
sively as the point of reference, and the sum of quotients of the [dependent measure] of
every other place divided by its distance from the reference point is computed" (Land
and Deane, 1992, page 227). In using this strategy to control for spatial autocorrelation

(I)
  It should be noted that the leading centers of military industrial facilities (without including
miscellaneous facilities) are different from those listed in table 2. If the miscellaneous facilities
are excluded, the top five industrial centers are; Atlanta, Minneapolis, Fort Worth, Dallas,
and Columbus (Ohio). With the exception of Minneapolis, where the Army and Navy own
ordnance facilities, these MSAs are home to large federally owned aircraft manufacturing
facilities (see Hooks, 1993; Hooks and Bloomquist, 1992). The top five centers listed in the table
include major manufacturing installations plus a significant military presence for logistics,
command, and control.
The influence of federal installations on employment growth, 1970 -1990                    1701

Table 3. Determinants of employment growth 1970-90, 310 metropolitan statistical areas (2-stage
least squares).

Determinants                                1970-80          1980-90        1970-90

Constant                                     118 633.90      86 647.50     - 4 5 542.41
Employment
  1970                                             0.12**        -                0.23*
  1980                                             -             0.01             -
Building space (square root) devoted to:
  miscellaneous civilian                         -6.07          -5.96           -7.21
  NASA, all functions                              43.51**      -5.64            68.39**
  Department of Energy, all functions             -7.50        -38.71**        -23.29
  military industrial and miscellaneous             3.55          8.56**         18.42**
Total commercial flights, 1971                   388.66**     -159.76         1 045.89**
Manufacturing establishments, 1954              -36.00**       -15.15**        -78.86**
Individuals attending college
  1970                                             1.71**         -               4.98**
  1980                                             -              1.07**          -
Land-Deane spatial effects term                  -4.02          -3.32             0.75
Adjusted R2                                        0.70           0.66            0.78
Note: Unemployment rate in 1970, manufacturing establishments in 1939, and average income
per family in 1970 served as instrumental variables.
*p ^ 0.05; *> ^ 0.01 (two-tailed tests).

it is necessary to identify the distance between each place and every other place in the
data set. By using a latitude and longitude coordinate for each MSA and a standard
trigonometric function we have developed a program that calculates the distance
between local areas and calculates the Land - Deane - Anselin spatial effects term for
each dependent measure. As the spatial effects are determined simultaneously with the
dependent variable, ordinary least squares estimates are likely to be biased. For this
reason, following Land and Deane's (1992) recommendation, two-stage least squares
are employed in these analyses.
     In table 3 we report the trends in employment growth over the 1970-90 period.
These results provide evidence of deindustrialization. There is a negative relationship
between manufacturing establishments in 1954 (a measure of older manufacturing
zones) and employment growth over the period. The positive relationship between air
flights and manufacturing growth provides evidence of the importance of infrastruc-
tural development in encouraging growth (Irwin and Kasarda, 1991; Ivy et al, 1995).
The positive relationship between college attendance and growth suggests the impor-
tance of a well-educated labor force. As the Land-Deane spatial effects term is not
statistically significant, it is unlikely that the results summarized in this table are
caused by an unmeasured spatial process. (2)
     Federal properties played an important role over the period. Miscellaneous civilian
installations were not associated with employment growth. We believe that this is the
result of poor measurement which resulted from the heterogeneous set of facilities
(2)
   Comparable analyses of manufacturing growth were also performed. The results were quite
similar to trends in overall employment reported in the text. Net of control variables, these
analyses provided evidence that NASA sparked growth in the 1970s, but did not do so when
federal priorities tilted toward national security in the 1980s. Conversely, military industrial
facilities did not spark growth in the 1970s, but were associated with employment growth in
the 1980s. No significant relationships were found between manufacturing employment growth
and civilian properties, and DOE facilities were inversely related to manufacturing growth.
Results are available from the authors upon request.
1702                                                                            G Hooks, V Getz

grouped under miscellaneous civilian.(3) The trends associated with NASA's and the
military's industrial and miscellaneous facilities reflect the Federal Government's chang-
ing budgetary priorities. In the 1970-80 panel, NASA installations are associated with
employment growth, although military and DOE facilities are not significant determi-
nants of growth. In the 1970s, as the United States demobilized from the Vietnam War,
NASA received relatively large budgets whilst the Department of Defense absorbed
budget cuts. In the 1980s, however, the United States undertook an unprecedented
peacetime military expansion, while civilian agencies (NASA included) absorbed cuts
(see Hooks and McLauchlan, 1992). In the 1980-90 panel, NASA installations are no
longer significantly associated with employment growth, but military facilities play a
significant and positive role. The budgetary swings of individual decades notwithstand-
ing, NASA properties contributed to growth in manufacturing over the 20-year period.
    One surprising finding concerns the role played by DOE installations. As the DOE
installations included the nation's premier laboratories, and very large facilities devoted
to the manufacture of nuclear weapons, we anticipated finding that the DOE facilities
stimulated growth. Instead, we found that these installations were negatively related to
growth in each decade and this negative relationship attained statistical significance in
the 1980-90 panel. As many DOE installations are located in remote areas and there-
fore excluded from an analysis of growth in metropolitan areas, the DOE findings must
be interpreted with caution. Nevertheless, given the spectacular and well-publicized
environmental problems that plague DOE installations, this negative relationship
may indicate that environmental damage attributable to federal installations impedes
economic growth in local areas. (4)

Discussion and conclusion
This research has corroborated the contention that the federal government has played an
important role in stimulating regional growth in recent years. Although miscellaneous
civilian facilities did not stimulate growth, NASA and military industrial facilities
stimulated manufacturing growth and overall employment growth. More compelling
still, the influence of NASA and military installations varied with the level of spending.
As NASA spending rose in the 1970s, its impact on employment was large and statistically
significant. However in the 1980s—a decade marked by a shift from civilian to defense
spending and falling budgets for NASA—NASA installations did not stimulate growth.
Conversely, military facilities did not stimulate growth in the 1970s as this was a period of
shrinking defense budgets. However, during the booming Reagan military buildup,
military installation stimulated growth in manufacturing and overall employment.
     We believe that the questions posed by this research are as interesting as the answers
we have provided. We were surprised by the negative relationship between DOE
installations and employment growth. Given the very large budgets and the fact that
(3)
    Given the rapid expansion of the medical sector, we explored the possibility that the National
Institute of Health (NIH) and other biomedical facilities were associated with growth. As we did
not find a significant relationship between these specific installations and employment growth,
we included NIH facilities with miscellaneous civilian.
(4)
    We examined preliminary results for evidence of influential cases. As this inspection suggested
that New York City was a suspicious case, we reestimated each equation without New York City
in the sample. Although the magnitude of the coefficients changed, the inclusion or exclusion of
New York City did not influence the results. The one variable that was heavily influenced by New
York City's inclusion was miscellaneous civilian facilities. Without New York City, these installa-
tions were negatively and significantly related to total employment growth for the 1970s and the
overall 20-year period. We did not report the analyses without New York City because dropping
this suspicious case had an uneven effect on the standard errors: some increased and some
decreased when this case was excluded. Results are available from authors upon request.
The influence of federal installations on employment growth, 1970- 1990                    1703

DOE installations assemble a highly educated and well-paid labor force, we anticipated
that these installations would stimulate growth. Instead, in the 1980s, as the Strategic
Defense Initiative was pouring resources into national laboratories and nuclear weapons
production, we found that DOE installations inhibited growth. We suspect that this
negative relationship may be the result of the highly toxic materials stored and produced
in DOE facilities. In the 1980s the Environmental Protection Agency (EPA) publicly
identified uncontrolled hazardous-waste sites. Many of these were DOE facilities (Jacob,
1992). Future research should make use of EPA data to identify hazardous-waste sites,
thereby controlling for the negative externalities of this form of federal investment.
     This research does not contradict the literature on new industrial districts, but it does
suggest the need for clarification and refinement. In large measure, the examination of
new industrial districts has stressed the network of interfirm relations in the region in
which a firm is embedded. However, our research offers a forceful reminder that the
federal government is prominent in a number of regional economies, and that its presence
influences growth. The challenge is to identify and examine the relationships between
federal properties and firms in the region. How do federal installations stimulate (or, in
the case of the DOE, inhibit) growth? Are federal installations richly embedded in local
economies, or are their most important links with a network of federal installations and
suppliers located at great distance from the installation? By examining both public and
 private organizations and the relations among them, we can develop a richer under-
 standing of the origins and the dynamics of industrial districts.
Acknowledgements. This research was supported by the National Science Foundation (SBR-
9320043). We would like to acknowledge the cooperation of the General Service Administration
and National Archives in making information available to us for this research. Nathan Fahrer
and Jennifer Vickers played an important role in the collection and management of data.
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