Files
Abstract
This study develops a computable general equilibrium (CGE) model to examine the
impact of recent defense cuts on California's economy. The study demonstrates use of a CGE
model to examine the sensitivity of regional economy models to assumptions about factor
migration. The results show that California is indeed sensitive to defense cuts, but that the
perceptions of workers and producers about the permanency of the cuts and about other future
opportunities in the state economy significantly affect gross state product (GSP) multipliers.
Depending on how these perceptions affect factor migration, GSP multipliers can be expected to
range from 1 to almost 5.