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Structural Breaks in Military Expenditures: Evidence for Egypt, Israel, Jordan and Syria

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  • Aamer Abu-Qarn

    ()
    (Department of Economics, Ben-Gurion University of the Negev)

  • Suleiman Abu-Bader

    ()
    (Department of Economics, Ben-Gurion University of the Negev)

Abstract

This paper endogenously determines the timing of structural breaks in military expenditures and military burdens for the major parties involved in the Israeli-Arab conflict, namely Egypt, Israel, Jordan, and Syria over the period 1960-2004. Utilizing a test proposed by Vogelsang (1997), we find that all these countries experienced structural breaks, though at different periods in the late 70s and during the 80s. These structural breaks mark a sharp decline in the military burden that can be attributed to the peace talks that were initiated shortly after the 1973 war. When applying the Bai and Perron (1998, 2003) multiple structural break tests we detect two structural breaks for every country. The first break occurred during the 60s and demonstrated a significant rise in the military burden prior to the 1973 war, whereas the second break occurred in the late 70s and during the 80s and was characterized by a sharp decline in the military burden following the instigation of peace negotiations.

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File URL: http://www.econ.bgu.ac.il/papers/231.pdf
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Bibliographic Info

Paper provided by Ben-Gurion University of the Negev, Department of Economics in its series Working Papers with number 231.

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Length: 27 pages
Date of creation: 2007
Date of revision:
Publication status: Published in Peace Economics, Peace Science and Public Policy as: Abu-Qarn, A. S. and Abu-Bader, S. (2008) “Structural Breaks in Military Expenditures: Evidence for Egypt, Israel, Jordan and Syria,” Peace Economics, Peace Science and Public Policy, 14(1), article 3.
Handle: RePEc:bgu:wpaper:231

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Keywords: Military Expenditures; Military Burden; Middle-East; Israeli-Arab Conflict; Structural Breaks.;

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References

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  1. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
  2. Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 1-22.
  3. Zivot, Eric & Andrews, Donald W K, 1992. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(3), pages 251-70, July.
  4. Dakurah, A. Henry & Davies, Stephen P. & Sampath, Rajan K., 2001. "Defense spending and economic growth in developing countries: A causality analysis," Journal of Policy Modeling, Elsevier, vol. 23(6), pages 651-658, August.
  5. Abu-Bader, Suleiman & Abu-Qarn, Aamer S., 2003. "Government expenditures, military spending and economic growth: causality evidence from Egypt, Israel, and Syria," Journal of Policy Modeling, Elsevier, vol. 25(6-7), pages 567-583, September.
  6. Benoit, Emile, 1978. "Growth and Defense in Developing Countries," Economic Development and Cultural Change, University of Chicago Press, vol. 26(2), pages 271-80, January.
  7. Zeileis, Achim & Kleiber, Christian & Kramer, Walter & Hornik, Kurt, 2003. "Testing and dating of structural changes in practice," Computational Statistics & Data Analysis, Elsevier, vol. 44(1-2), pages 109-123, October.
  8. Jomana Amara, 2008. "Nato Defense Expenditures: Common Goals Or Diverging Interests? A Structural Analysis," Defence and Peace Economics, Taylor & Francis Journals, vol. 19(6), pages 449-469.
  9. repec:cup:etheor:v:13:y:1997:i:6:p:818-49 is not listed on IDEAS
  10. Perron, P. & Bai, J., 1995. "Estimating and Testing Linear Models with Multiple Structural Changes," Cahiers de recherche 9552, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  11. Lim, David, 1983. "Another Look at Growth and Defense in Less Developed Countries," Economic Development and Cultural Change, University of Chicago Press, vol. 31(2), pages 377-84, January.
  12. McGuire, Martin C, 1987. "Foreign Assistance, Investment, and Defense: A Methodological Study with an Application to Israel, 1960-1979," Economic Development and Cultural Change, University of Chicago Press, vol. 35(4), pages 847-73, July.
  13. Vogelsang, Timothy J., 1997. "Wald-Type Tests for Detecting Breaks in the Trend Function of a Dynamic Time Series," Econometric Theory, Cambridge University Press, vol. 13(06), pages 818-848, December.
  14. Julide Yildirim & Selami Sezgin & Nadir Ocal, 2005. "Military Expenditure And Economic Growth In Middle Eastern Countries: A Dynamic Panel Data Analysis," Defence and Peace Economics, Taylor & Francis Journals, vol. 16(4), pages 283-295.
  15. Clemente, Jesus & Montanes, Antonio & Reyes, Marcelo, 1998. "Testing for a unit root in variables with a double change in the mean," Economics Letters, Elsevier, vol. 59(2), pages 175-182, May.
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Cited by:
  1. Abu-Qarn, Aamer S. & Abu-Bader, Suleiman, 2009. "On the dynamics of the Israeli-Arab arms race," The Quarterly Review of Economics and Finance, Elsevier, vol. 49(3), pages 931-943, August.
  2. Levent, Korap, 2007. "Turkish money demand, revisited: some implications for inflation and currency substitution under structural breaks," MPRA Paper 19479, University Library of Munich, Germany.
  3. Ucal, Meltem & Karabulut, Gokhan & Bilgin, Mehmet Huseyin, 2009. "Military Expenditures and Inequality: Empirical Evidence from Israel," MPRA Paper 48643, University Library of Munich, Germany.

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