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'Guns Or Butter?' Revisited: Robustness And Nonlinearity Issues In The Defense-Growth Nexus

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  • Jes�s Crespo Cuaresma
  • Gerhard Reitschuler

Abstract

The relationship between military expenditure and growth is studied taking into account potential nonlinearities and robustness issues in the specification of the econometric models used. Using cross-country growth regressions and the widely used Feder-Ram model, the partial correlation between defense and economic growth appears robust and significantly negative only for countries with a relatively low military expenditure ratio. While the externality effect appears positive in this subgroup of countries, the overall effect turns negative due to the size effect of the military sector.

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Bibliographic Info

Article provided by Scottish Economic Society in its journal Scottish Journal of Political Economy.

Volume (Year): 53 (2006)
Issue (Month): 4 (09)
Pages: 523-541

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Handle: RePEc:bla:scotjp:v:53:y:2006:i:4:p:523-541

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References

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Cited by:
  1. Goodness C. Aye & Mehmet Balcilar & John P. Dunne & Rangan Gupta & Renee van Eyden, 2013. "Military Expenditure, Economic Growth and Structural Instability: A Case Study of South Africa," Working Papers 201344, University of Pretoria, Department of Economics.
  2. Luca Pieroni, 2007. "Military Spending and Economic Growth," Working Papers 0708, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
  3. Chad R. Wilkerson & Megan D. Williams, 2008. "How is the rise in national defense spending affecting the Tenth District economy?," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 49-79.
  4. Obreja Brasoveanu, Laura, 2010. "The Impact of Defense Expenditure on Economic Growth," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 148-167, December.
  5. Tiwari, Aviral & Shahbaz, Muhammad, 2011. "Does Defence Spending Stimulate Economic Growth in India?," MPRA Paper 30880, University Library of Munich, Germany, revised 18 Apr 2011.
  6. Hsien-Hung Kung & Jennifer C. H. Min, 2013. "Military Spending and Economic Growth Nexus in Sixteen Latin and South American Countries: A Bootstrap Panel Causality Test," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 171-185, December.
  7. Tetsuya, Saito, 2007. "Military Expenditures of Dictatorial Regimes: A Strategic Theory," MPRA Paper 6155, University Library of Munich, Germany.

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