The economic effects of rearmament: Evidence from Nazi Germany

Lionel Chambon

No 2322, Kiel Working Papers from Kiel Institute for the World Economy

Abstract: Using novel archival data on the German Luftwaffe, I estimate the causal effect of military spending on unemployment in Nazi Germany between 1932 and 1936. Exploiting cross-district variation of supplier locations, I estimate the impact of military procurement on local labor market outcomes. I find that the average supplier location experienced a decline in unemployment per capita of approximately 6 percentage points. A back-of-the-envelope calculation suggests that total military spending represents around 32% of the observed aggregate fall in unemployment. I also find evidence of significant spillovers, indicating that my results likely underestimate the true effect of military spending.

Keywords: military spending; rearmament; local multipliers; difference-in-differences; unemployment (search for similar items in EconPapers)
JEL-codes: C21 E62 H56 J63 N14 N44 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:341631

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