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To explain the magnetic behavior of plastic deformation of thin magnetic films (Fe and permalloy) on an elastic substrate (nitinol), it is noted that unlike in the bulk, the dislocation density does not increase dramatically because of the dimensional constraint. As a result, the resulting residual stress, even though strain hardening is limited, dominates the observed magnetic behavior. Thus, with the field parallel to the stress axis, the compressive residual stress resulting from plastic deformation causes a decrease in remanence and an increase in coercivity; and with the field perpendicular to the stress axis, the resulting compressive residual stress causes an increase in remanence and a decrease in coercivity. These elements have been inserted into the model previously developed for plastic deformation in the bulk, producing the aforementioned behavior, which has been observed experimentally in the films.