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The presence of defense activity in Hawaii is significant, but how much does it add to Hawaii's economy? We collected data on defense expenditures on personnel and procurement and estimated the relationship between these expenditures and the levels of output, employment, and earnings in Hawaii's economy. The analysis uses an input-output model for Hawaii that describes the relationship among industries and final demand. DoD expenditures in Hawaii during FY 2007–2009 averaged $6.5 billion per year in 2009 dollars — $4.1 billion for personnel and $2.4 billion for procurement. These expenditures were associated with $12.2 billion worth of Hawaii's output — 18 percent of Hawaii's 2009 GDP — and 101,000 jobs. We considered the sensitivity of the estimates to a number of factors, including undercounting or overcounting defense procurement, Hawaii state taxes paid by defense personnel, the savings rate of defense personnel, Impact Aid to Hawaii schools, spending by afloat and deployed personnel, and procurement by commissaries and exchanges. Most factors made little difference, but the savings rate of personnel and where the earnings of afloat and deployed personnel are spent could decrease the results by approximately 10 percent.

The research described in this report was prepared for the Office of the Secretary of Defense (OSD). The research was conducted within the RAND National Defense Research Institute, a federally funded research and development center sponsored by OSD, the Joint Staff, the Unified Combatant Commands, the Navy, the Marine Corps, the defense agencies, and the defense Intelligence Community.

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