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Defense Spending and Economic Growth in South Korea: The Indirect Link

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  • Uk Heo

    (Department of Political Science, University of Wisconsin-Milwaukee)

Abstract

Due to the lingering food crisis, speculations about the collapse of the North Korean regime have intensified in recent years. The collapse of the North Korean regime is expected to generate a tremendous economic burden on the South Korean economy. Moreover, the current economic crisis in South Korea requires a tight fiscal policy. Thus, on the basis of the peace dividend argument, some suggest that South Korea should reduce its military expenditures to prepare for the upcoming extra economic burden. For this reason, the economic effects of defense spending on growth in South Korea are a significant concern for policymakers as well as scholars. I examined the economic effects of defense spending on growth in terms of time and magnitude by investigating the direct effects as well as the indirect impacts (via investment and export) of military spending on economic growth. A three-equation econometric model was specified and empirically tested using South Korean data for 1954-95. The findings of this study reveal that the overall economic effects of defense spending on growth are negative although they seem to be indirect or delayed.

Suggested Citation

  • Uk Heo, 1999. "Defense Spending and Economic Growth in South Korea: The Indirect Link," Journal of Peace Research, Peace Research Institute Oslo, vol. 36(6), pages 699-708, November.
    • Handle: RePEc:sae:joupea:v:36:y:1999:i:6:p:699-708
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    Cited by:

    1. Sefa Awaworyi Churchill & Siew Ling Yew, 2018. "The effect of military expenditure on growth: an empirical synthesis," Empirical Economics, Springer, vol. 55(3), pages 1357-1387, November.
    2. Feng-Li Lin & Mei-Chih Wang, 2019. "Does economic growth cause military expenditure to go up? Using MF-VAR model," Quality & Quantity: International Journal of Methodology, Springer, vol. 53(6), pages 3097-3117, November.
    3. Hee-Won Yang & Chan-Young Hong & Seong-Mun Jeong & Jeong-Dong Lee, 2012. "The military Expenditure and Economic Growth in the case of the South Korea : The dynamic Computational Equilibrium model in an Endogeneous Growth Perspective," EcoMod2012 4264, EcoMod.
    4. Uk Heo & John Bohte, 2012. "Who Pays for National Defense? Financing Defense Programs in the United States, 1947–2007," Journal of Conflict Resolution, Peace Science Society (International), vol. 56(3), pages 413-438, June.
    5. Mehmet Akif Destek & Ilyas Okumus, 2016. "Military Expenditure and Economic Growth in Brics and Mist Countries: Evidence from Bootstrap Panel Granger Causality Analysis," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 14(2), pages 175-186.
    6. Uk Heo & Min Ye, 2016. "Defense Spending and Economic Growth around the Globe: The Direct and Indirect Link," International Interactions, Taylor & Francis Journals, vol. 42(5), pages 774-796, October.
    7. Oya Erdogdu, 2008. "Political Decisions, Defense And Growth," Defence and Peace Economics, Taylor & Francis Journals, vol. 19(1), pages 27-35.
    8. Qurat Ul AIN & Syed Imran RAIS & Syed Tahir Hussain SHAH & Khalid ZAMAN & Shakira EJAZ & Abdul MANSOOR, 2019. "Empirically testing Keynesian defense burden hypothesis, nonlinear hypothesis, and spillover hypothesis: Evidence from Asian countries," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(1(618), S), pages 169-182, Spring.
    9. Guo Ping & Alotaish Mohammed Saud M., 2017. "Revisiting the Causal Nexus between Defense Expenditure and Economic Growth: Time Series Analysis for Saudi Arabia," Asian Journal of Economic Modelling, Asian Economic and Social Society, vol. 5(1), pages 35-43, March.
    10. repec:agr:journl:v:1(618):y:2019:i:1(618):p:169-182 is not listed on IDEAS
    11. Francisco Garcia-Blanch, 2001. "An Empirical Inquiry into the Nature of South Korean Economic Growth," CID Working Papers 74A, Center for International Development at Harvard University.

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