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A Criritique of the Multi-Sector Model of the Effects of Military Spending on Economic Growth

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  • Alexamder, W.R.
  • Hansen, P. Author-Emai
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    Abstract

    The multi-sector model of economic growth is the most widely used framework for empirically investigating the effects of military spending on growth. It has also been applied to ‘nonmilitary’ sectors of the economy, such as exporters and the government. This paper presents a survey of criticisms in the context of models with a military sector (but also applicable to nonmilitary models). These include: the possibility of spurious correlations, misspecification biases, observational equivalence and invalid statistical inferences concerning a key parameter of the model. It is concluded, therefore, that overcoming these shortcomings or finding a more robust, alternative approach would be worthwhile.

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    File URL: http://www.usc.es/economet/reviews/aeid423.pdf
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    Bibliographic Info

    Article provided by Euro-American Association of Economic Development in its journal Applied Econometrics and International Development.

    Volume (Year): 4 (2004)
    Issue (Month): 2 ()
    Pages:

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    Handle: RePEc:eaa:aeinde:v:4:y:2004:i:1_11

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    1. Deger, Saadet & Sen, Somnath, 1995. "Military expenditure and developing countries," Handbook of Defense Economics, in: Keith Hartley & Todd Sandler (ed.), Handbook of Defense Economics, edition 1, volume 1, chapter 11, pages 275-307 Elsevier.
    2. Rao, V V Bhanoji, 1989. "Government Size and Economic Growth: A New Framework and Some Evidence from Cross-Section and Time-Series Data: Comment," American Economic Review, American Economic Association, vol. 79(1), pages 272-80, March.
    3. Alexander, W. Robert J. & Hansen, Paul & Owen, P. Dorian, 1996. "Inference on productivity differentials in multi-sector models of economic growth," Journal of Development Economics, Elsevier, vol. 51(2), pages 315-325, December.
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    6. Peter Batchelor & J. Paul Dunne & David Saal, 2000. "Military spending and economic growth in South Africa," Defence and Peace Economics, Taylor & Francis Journals, vol. 11(4), pages 553-571.
    7. Ram, Rati, 1987. "Exports and Economic Growth in Developing Countries: Evidence from Time-Series and Cross-Section Data," Economic Development and Cultural Change, University of Chicago Press, vol. 36(1), pages 51-72, October.
    8. Ram, Rati, 1995. "Defense expenditure and economic growth," Handbook of Defense Economics, in: Keith Hartley & Todd Sandler (ed.), Handbook of Defense Economics, edition 1, volume 1, chapter 10, pages 251-274 Elsevier.
    9. Biswas, Basudeb & Ram, Rati, 1986. "Military Expenditures and Economic Growth in Less Developed Countries: An Augmented Model and Further Evidence," Economic Development and Cultural Change, University of Chicago Press, vol. 34(2), pages 361-72, January.
    10. Paul Dunne & Eftychia Nikolaidou, 2005. "Military Spending and Economic Growth in Greece, Portugal and Spain," Working Papers 0510, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    11. Carr, Jack L, 1989. "Government Size and Economic Growth: A New Framework and Some Evidence from Cross-Section and Time-Series Data: Comment," American Economic Review, American Economic Association, vol. 79(1), pages 267-71, March.
    12. Feder, Gershon, 1983. "On exports and economic growth," Journal of Development Economics, Elsevier, vol. 12(1-2), pages 59-73.
    13. Joerding, Wayne, 1986. "Economic growth and defense spending : Granger Causality," Journal of Development Economics, Elsevier, vol. 21(1), pages 35-40, April.
    14. Sheehey, Edmund J., 1993. "Exports as a factor of production: A consistency test," World Development, Elsevier, vol. 21(1), pages 155-160, January.
    15. Dowrick, Steve & Gemmell, Norman, 1991. "Industrialisation, Catching Up and Economic Growth: A Comparative Study across the World's Capitalist Economies," Economic Journal, Royal Economic Society, vol. 101(405), pages 263-75, March.
    16. Alvin Birdi & Paul Dunne & David Saal, 2000. "The impact of arms production on the South African manufacturing industry," Defence and Peace Economics, Taylor & Francis Journals, vol. 11(4), pages 597-613.
    17. Odedokun, M. O., 1996. "Alternative econometric approaches for analysing the role of the financial sector in economic growth: Time-series evidence from LDCs," Journal of Development Economics, Elsevier, vol. 50(1), pages 119-146, June.
    18. Deger, Saadet, 1986. "Economic Development and Defense Expenditure," Economic Development and Cultural Change, University of Chicago Press, vol. 35(1), pages 179-96, October.
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