An Economic Analysis of Investment in the United States Shipbuilding Industry

Abstract

Amidst the global economic recession and sizeable injections of federal stimulus packages, the U.S. Navy's budget for ship construction has experienced only modest real growth. While the 2010 Quadrennial Defense Review has reaffirmed a fleet size goal of 313 ships, some suggest that $20 billion or more per year is needed to attain this level of strategic resources. This research has analyzed the United States shipbuilding industry as a potential source of economic stimulus using measures applied in the United Kingdom by economists at Oxford Economics. First, monetary impacts from the ship building and repairing sector were analyzed using U.S. Bureau of Economic Analysis (BEA) input/output data and the Leontief inversion process modeled at Carnegie Mellon University. This sector was compared with five alternative investments. Second, the benefits of the shipyard-related labor market were analyzed using data from the BEA and Naval Sea Systems Command. Measures of capital intensity and capacity were then applied to companies representing five industries. The results suggest that U.S. shipbuilding generates monetary benefits comparable to alternatives, while supporting more labor than other sectors. Finally, excess capacity shows a clear ability to absorb an increase in demand, providing prompt and positive impact on sustainable economic recovery.