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"Guns or Butter?" Revisited: Robustness and Nonlinearity Issues in the Defense-Grotwth Nexus

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The relationship between military expenditure and growth is studied taking into account potential nonlinearities and robustness issues in the specification of the econometric models used. Using cross-country growth regressions and the widely used Feder-Ram model, the partial correlation between defense and economic growth appears robust and significantly negative only for countries with a relatively low military expenditure ratio. While the externality effect appears positive in this subgroup of countries, the overall effect turns negative due to the size effect of the military sector.

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File URL: http://homepage.univie.ac.at/Papers.Econ/RePEc/vie/viennp/vie0310.pdf
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Paper provided by University of Vienna, Department of Economics in its series Vienna Economics Papers with number 0310.

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Date of creation: Aug 2003
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Handle: RePEc:vie:viennp:0310

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Cited by:
  1. Goodness C. Aye & Mehmet Balcilar & John P. Dunne & Rangan Gupta & Renee van Eyden, 2013. "Military Expenditure, Economic Growth and Structural Instability: A Case Study of South Africa," Working Papers 201344, University of Pretoria, Department of Economics.
  2. Hsien-Hung Kung & Jennifer C. H. Min, 2013. "Military Spending and Economic Growth Nexus in Sixteen Latin and South American Countries: A Bootstrap Panel Causality Test," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 171-185, December.
  3. Obreja Brasoveanu, Laura, 2010. "The Impact of Defense Expenditure on Economic Growth," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 148-167, December.
  4. 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.
  5. Tiwari, Aviral & Shahbaz, Muhammad, 2011. "Does Defence Spending Stimulate Economic Growth in India?," MPRA Paper 30880, University Library of Munich, Germany, revised 18 Apr 2011.
  6. Chad R. Wilkerson & Megan D. Williams, 2008. "How is the rise in national defense spending affecting the Tenth District economy?," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 49-79.
  7. Tetsuya, Saito, 2007. "Military Expenditures of Dictatorial Regimes: A Strategic Theory," MPRA Paper 6155, University Library of Munich, Germany.

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