In the midst of a major U.S. military effort in Iraq and the Middle East, economists should be able to assess
the relationship between U.S. troops and growth.
The necessity of military force in providing security for
nation-building is a common assumption among policymakers and international affairs experts, but there has never been an econometric analysis of the impact of troops on growth. We use a newly constructed disaggregated dataset on the deployment of U.S. troops over the years 1950-2000, and discover a positive relationship with host country economic growth, robust to multiple control variables.
The authors argue that the majority of the current growth literature suggest that economic growth is conditional upon good institutions, but the development of such institutions are fraught with political problems and poor mechanism design. However, the presence of American troops provide three unique stimuli to the creation and maintenance of good institutions: security, the spread of technology, and economic stimulation by the influx of and spending by American soldiers. While an intriguing micro-foundation for the development of credible institutions, the US Troop data alone should be interesting to play with beyond the 26 multivariate regressions they offer.
In a historical context, I am sure not all occupiers are equal and would be curious how generalizable this would be to French, Soviet, British, Japanese, and other countries that have had overseas troop deployments. As the authors mention, the conditions of occupation will also have a significant effect on the terms of growth. Consequently, a comparison between British and American hegemonic deployments may be apt to see if the American effect of deployment is unique.