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Models Of Military Expenditure And Growth: A Critical Review

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  • J. Paul Dunne
  • Ron Smith
  • Dirk Willenbockel

Abstract

This paper reviews some of the theoretical and econometric issues involved in estimating growth models that include military spending. While the mainstream growth literature has not found military expenditure to be a significant determinant of growth, much of the defence economics literature has found significant effects. The paper argues that this is largely the product of the particular specification, the Feder-Ram model, that has been used in the defence economics literature but not in the mainstream literature. The paper critically evaluates this model, detailing its problems and limitations and suggests that it should be avoided. It also critically evaluates two alternative theoretical approaches, the Augmented Solow and the Barro models, suggesting that they provide a more promising avenue for future research. It concludes with some general comments about modelling the links between military expenditure and growth.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Defence and Peace Economics.

Volume (Year): 16 (2005)
Issue (Month): 6 ()
Pages: 449-461

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Handle: RePEc:taf:defpea:v:16:y:2005:i:6:p:449-461

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Related research

Keywords: Military expenditure; Defence spending; Growth;

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References

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  1. James Murdoch & Chung-Ron Pi & Todd Sandler, 1997. "The impact of defense and non-defense public spending on growth in Asia and Latin America," Defence and Peace Economics, Taylor & Francis Journals, vol. 8(2), pages 205-224.
  2. Kevin Lee & M. Hashem Pesaran & Ron Smith, . "Growth and Convergence in a Multi-County empirical Stochastic Solow Model," Discussion Papers in Economics 96/14, Department of Economics, University of Leicester.
  3. 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.
  4. Bleaney, Michael & Nishiyama, Akira, 2002. " Explaining Growth: A Contest between Models," Journal of Economic Growth, Springer, vol. 7(1), pages 43-56, March.
  5. Aizenman, Joshua & Glick, Reuven, 2003. "Military Expenditure, Threats, and Growth," Santa Cruz Department of Economics, Working Paper Series qt41r4105h, Department of Economics, UC Santa Cruz.
  6. Shieh, Jhy-yuan & Lai, Ching-chong & Chang, Wen-ya, 2002. "The impact of military burden on long-run growth and welfare," Journal of Development Economics, Elsevier, vol. 68(2), pages 443-454, August.
  7. Feder, Gershon, 1983. "On exports and economic growth," Journal of Development Economics, Elsevier, vol. 12(1-2), pages 59-73.
  8. William Hauk & Romain Wacziarg, 2009. "A Monte Carlo study of growth regressions," Journal of Economic Growth, Springer, vol. 14(2), pages 103-147, June.
  9. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S103-26, October.
  10. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
  11. Nicholas Antonakis, 1997. "Defence spending and growth in Greece: a comment and further empirical evidence," Applied Economics Letters, Taylor & Francis Journals, vol. 4(10), pages 651-655.
  12. 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.
  13. Jesus Crespo Cuaresma & Gerhard Reitschuler, 2004. "A non-linear defence-growth nexus? evidence from the US economy," Defence and Peace Economics, Taylor & Francis Journals, vol. 15(1), pages 71-82.
  14. Gernot Doppelhofer & Ronald I. Miller & Xavier Sala-i-Martin, 2000. "Determinants of Long-Term Growth: A Bayesian Averaging of Classical Estimates (BACE) Approach," NBER Working Papers 7750, National Bureau of Economic Research, Inc.
  15. Knight, Malcolm & Loayza, Norman & Villanueva, Delano, 1996. "The peace dividend : military spending cuts and economic growth," Policy Research Working Paper Series 1577, The World Bank.
  16. Lee, Kevin & Pesaran, M Hashem & Smith, Ron, 1997. "Growth and Convergence in Multi-country Empirical Stochastic Solow Model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(4), pages 357-92, July-Aug..
  17. Liutang Gong & Heng-fu Zou, 2001. "Military spending and stochastic growth," CEMA Working Papers 57, China Economics and Management Academy, Central University of Finance and Economics.
  18. 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.
  19. 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.
  20. 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.
  21. Selami Sezgin, 1997. "Country survey X: Defence spending in Turkey," Defence and Peace Economics, Taylor & Francis Journals, vol. 8(4), pages 381-409.
  22. Brumm, Harold J., 1997. "Military Spending, Government Disarray, and Economic Growth: A Cross-Country Empirical Analysis," Journal of Macroeconomics, Elsevier, vol. 19(4), pages 827-838, October.
  23. Selami Sezgin, 2000. "A note on defence spending in turkey: New findings," Defence and Peace Economics, Taylor & Francis Journals, vol. 11(2), pages 427-435.
  24. Jurgen Brauer, 2002. "Survey and Review of the Defense Economics Literature on Greece and Turkey: What Have We Learned?," Defence and Peace Economics, Taylor & Francis Journals, vol. 13(2), pages 85-107.
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