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Growth, Political Instability and the Defence Burden

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  • Blomberg, S Brock

Abstract

The author develops and tests a model to examine the economic effects of political instability and military expenditure. Defense plays three important roles in the model: (1) it provides insurance against political instability; (2) it augments the human capital stock by training the labour force; but (3) it comes at the expense of consumption. The resulting theory predicts that increased political instability or increased defense can inhibit economic growth. Using panel data, the author finds that increases in political instability do decrease growth while increases in defense do decrease political instability. I also find that increases in defense have a direct negative effect on growth, although the relation is weak. Copyright 1996 by The London School of Economics and Political Science.

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Bibliographic Info

Article provided by London School of Economics and Political Science in its journal Economica.

Volume (Year): 63 (1996)
Issue (Month): 252 (November)
Pages: 649-72

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Handle: RePEc:bla:econom:v:63:y:1996:i:252:p:649-72

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  1. Roubini, Nouriel & Swagel, Phillip & Ozler, Sule & Alesina, Alberto, 1996. "Political Instability and Economic Growth," Scholarly Articles 4553024, Harvard University Department of Economics.
  2. Skaperdas, S., 1990. "Conflict And Attitudes Toward Risk," Papers 90-91-05, California Irvine - School of Social Sciences.
  3. Rogoff, Kenneth, 1990. "Equilibrium Political Budget Cycles," American Economic Review, American Economic Association, vol. 80(1), pages 21-36, March.
  4. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  5. Kenneth Rogoff & Anne Sibert, 1986. "Elections and Macroeconomic Policy Cycles," NBER Working Papers 1838, National Bureau of Economic Research, Inc.
  6. Smith, Ronald P., 1980. "Military expenditure and investment in OECD countries, 1954-1973," Journal of Comparative Economics, Elsevier, vol. 4(1), pages 19-32, March.
  7. Alesina, Alberto, et al, 1996. " Political Instability and Economic Growth," Journal of Economic Growth, Springer, vol. 1(2), pages 189-211, June.
  8. Blanchard, Olivier J, 1985. "Debt, Deficits, and Finite Horizons," Journal of Political Economy, University of Chicago Press, vol. 93(2), pages 223-47, April.
  9. Deger, Saadet, 1986. "Economic Development and Defense Expenditure," Economic Development and Cultural Change, University of Chicago Press, vol. 35(1), pages 179-96, October.
  10. Smith, Ron P, 1978. "Military Expenditure and Capitalism: A Reply," Cambridge Journal of Economics, Oxford University Press, vol. 2(3), pages 299-304, September.
  11. Smith, R P, 1977. "Military Expenditure and Capitalism," Cambridge Journal of Economics, Oxford University Press, vol. 1(1), pages 61-76, March.
  12. Newey, Whitney K., 1987. "Efficient estimation of limited dependent variable models with endogenous explanatory variables," Journal of Econometrics, Elsevier, vol. 36(3), pages 231-250, November.
  13. Londregan, J. & Poole, K.T., 1991. "The Seizure of Executive Power and Economic Growth: Some Additional Evidence," GSIA Working Papers 1991-6, Carnegie Mellon University, Tepper School of Business.
  14. Faini, Riccardo & Annez, Patricia & Taylor, Lance, 1984. "Defense Spending, Economic Structure, and Growth: Evidence among Countries and Over Time," Economic Development and Cultural Change, University of Chicago Press, vol. 32(3), pages 487-98, April.
  15. Smith, R P, 1980. "The Demand for Military Expenditure," Economic Journal, Royal Economic Society, vol. 90(363), pages 811-20, December.
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Cited by:
  1. Fic, Tatiana & Ghate, Chetan, 2005. "The welfare state, thresholds, and economic growth," Economic Modelling, Elsevier, vol. 22(3), pages 571-598, May.
  2. S. Brock Blomberg & Gregory D. Hess, 2006. "How Much Does Violence Tax Trade?," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 599-612, November.
  3. Asea, P.K. & Blomberg, S.B., 1997. "Lending Cycles," Papers 97-01, Wellesley College - Department of Economics.
  4. d'Agostino, Giorgio & Dunne, Paul J. & Pieroni, Luca, 2012. "Government spending, corruption and economic growth," MPRA Paper 38109, University Library of Munich, Germany.
  5. Ali Kutan & Su Zhou, 1995. "Sociopolitical instability, volatility, and the bid-ask spread: Evidence from the free market for dollars in Poland," Open Economies Review, Springer, vol. 6(3), pages 225-236, July.
  6. Alptekin, Aynur & Levine, Paul, 2012. "Military expenditure and economic growth: A meta-analysis," European Journal of Political Economy, Elsevier, vol. 28(4), pages 636-650.
  7. Alesina, Alberto & Perotti, Roberto, 1994. "The Political Economy of Growth: A Critical Survey of the Recent Literature," World Bank Economic Review, World Bank Group, vol. 8(3), pages 351-71, September.
  8. Jong-A-Pin, Richard, 2009. "On the measurement of political instability and its impact on economic growth," European Journal of Political Economy, Elsevier, vol. 25(1), pages 15-29, March.
  9. Michael D. Stroup & Jac C. Heckelman, 2001. "Size Of The Military Sector And Economic Growth: A Panel Data Analysis Of Africa And Latin America," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 329-360, November.
  10. Janmaat, John A & Ruijs, Arjan, 2006. "Investing in Arms to Secure Water," MPRA Paper 10667, University Library of Munich, Germany.

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