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Optimal Military Spending in the US: A Time Series Analysis

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Author Info

  • Giorgio d'Agostino

    (University of Perugia and UWE, Bristol)

  • Luca Pieroni

    ()
    (University of Perugia and UWE, Bristol)

  • J Paul Dunne

    ()
    (Department of Economics, British University in Egypt and UWE, Bristol)

Abstract

This paper extends previous work on the optimal size of government spend- ing by including nested functional decompositions of military spending into consumption and investment. Post World War II US data are then used to estimate nested non-linear growth models using semiparametric methods. As expected, investment in military and non-military expenditure are both found to be productive expenditures. Moreover there is little evidence to suggest that current military spending is having a negative impact on economic growth in the US, while civilian consumption only tends to have only a weak impact. This does not imply that society will necessarily bene?t from a reallocation of more spending to the military sector, nor that it is the best way to achieve economic growth. It does suggest that the US economy is not necessarily being hindered by its current military burden.

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File URL: http://carecon.org.uk/DPs/0903.pdf
File Function: First version, 2009
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Bibliographic Info

Paper provided by Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol in its series Working Papers with number 0903.

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Length: 28 pages
Date of creation: Mar 2009
Date of revision:
Handle: RePEc:uwe:wpaper:0903

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Postal: Frenchay Campus, Coldharbour Lane, Bristol BS16 1QY
Phone: 0117 328 3610
Web page: http://www1.uwe.ac.uk/bl/research/bristoleconomics.aspx
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Related research

Keywords: Economic growth; productive state spending; military spending; semi-parametric estimation;

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References

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  1. David Aschauer, 1988. "Is public expenditure productive?," Staff Memoranda 88-7, Federal Reserve Bank of Chicago.
  2. repec:wop:humbsf:1998-10 is not listed on IDEAS
  3. Jones, Charles I, 1995. "Time Series Tests of Endogenous Growth Models," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 495-525, May.
  4. Aynur Alptekin & Paul Levine, 2009. "Military Expenditure and Economic Growth Literature: A Meta-Analysis," School of Economics Discussion Papers 0209, School of Economics, University of Surrey.
  5. Kneller, Richard & Bleaney, Michael F. & Gemmell, Norman, 1999. "Fiscal policy and growth: evidence from OECD countries," Journal of Public Economics, Elsevier, vol. 74(2), pages 171-190, November.
  6. Michael Gerace, 2002. "US Military Expenditures and Economic Growth: Some Evidence from Spectral Methods," Defence and Peace Economics, Taylor & Francis Journals, vol. 13(1), pages 1-11.
  7. Barro, Robert J., 1990. "Government Spending in a Simple Model of Endogeneous Growth," Scholarly Articles 3451296, Harvard University Department of Economics.
  8. Sandler, Todd & Hartley, Keith, 2007. "Defense in a Globalized World: An Introduction," Handbook of Defense Economics, Elsevier.
  9. Kapetanios, George & Shin, Yongcheol & Snell, Andy, 2003. "Testing for a unit root in the nonlinear STAR framework," Journal of Econometrics, Elsevier, vol. 112(2), pages 359-379, February.
  10. Timothy J. Vogelsang, 1998. "Trend Function Hypothesis Testing in the Presence of Serial Correlation," Econometrica, Econometric Society, vol. 66(1), pages 123-148, January.
  11. J Paul Dunne & Mehmet Uye, 2009. "Military Spending and Development," Working Papers 0902, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
  12. Valerie A. Ramey & Matthew D. Shapiro, 1999. "Costly Capital Reallocation and the Effects of Government Spending," NBER Working Papers 6283, National Bureau of Economic Research, Inc.
  13. Stefan Mittnik & Thorsten Neumann, 2003. "Time-Series Evidence on the Nonlinearity Hypothesis for Public Spending," Economic Inquiry, Western Economic Association International, vol. 41(4), pages 565-573, October.
  14. Shantayanan Devarajan & Vinaya Swaroop & Heng-fu Zou, 1996. "The composition of public expenditure and economic growth," CEMA Working Papers 77, China Economics and Management Academy, Central University of Finance and Economics.
  15. Kocherlakota, Narayana R & Yi, Kei-Mu, 1996. "A Simple Time Series Test of Endogenous vs. Exogenous Growth Models: An Application to the United States," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 126-34, February.
  16. 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.
  17. J Paul Dunne & Ron Smith & Dirk Willenbockel, 2004. "Models of Military Expenditure and Growth: A Critical Review," Working Papers 0408, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
  18. 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.
  19. David I. Harvey & Stephen J. Leybourne, 2007. "Testing for time series linearity," Econometrics Journal, Royal Economic Society, vol. 10(1), pages 149-165, 03.
  20. 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.
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Citations

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Cited by:
  1. Chen, Pei-Fen & Lee, Chien-Chiang & Chiu, Yi-Bin, 2014. "The nexus between defense expenditure and economic growth: New global evidence," Economic Modelling, Elsevier, vol. 36(C), pages 474-483.
  2. Giorgio d'Agostino & Luca Pieroni & J Paul Dunne, 2010. "Assessing the Effects of Military Expenditure on Growth," Working Papers 1012, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
  3. Wang, Tung-Pao & Shyu, Stacy Huey-Pyng & Chou, Han-Chung, 2012. "The impact of defense expenditure on economic productivity in OECD countries," Economic Modelling, Elsevier, vol. 29(6), pages 2104-2114.

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