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The peace dividend : military spending cuts and economic growth

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  • Knight, Malcolm
  • Loayza, Norman
  • Villanueva, Delano

Abstract

Conventional wisdom suggests that reducing military spending may improve a country's economic growth, but empirical studies have produced ambiguous results on this point. Extending a standard growth model, the authors exploit both cross-section and time-series dimensions of available data to get consistent estimates of the growth-retarding effects of military spending. Military spending is growth-retarding because of its adverse impact on capital formation and resourceallocation. Model simulation results suggest a substantial long-term peace dividend - in the form of higher capacity output per capita - that may result from: 1) markedly lower military spending in most regions in the late 1980s; and 2) future cuts in military spending if global peace is secured.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1577.

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Date of creation: 29 Feb 1996
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Handle: RePEc:wbk:wbrwps:1577

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Keywords: Legal Products; Peace&Peacekeeping; Economic Theory&Research; Environmental Economics&Policies; Decentralization; Peace&Peacekeeping; Achieving Shared Growth; Inequality; Economic Theory&Research; Legal Products;

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References

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  1. T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
  2. De Gregorio, Jose, 1993. "Inflation, taxation, and long-run growth," Journal of Monetary Economics, Elsevier, vol. 31(3), pages 271-298, June.
  3. Landau, Daniel, 1993. "The economic impact of military expenditures," Policy Research Working Paper Series 1138, The World Bank.
  4. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
  5. Jong-Wha Lee, 1992. "International Trade, Distortions and Long-Run Economic Growth," IMF Working Papers 92/90, International Monetary Fund.
  6. Swan, Trevor W, 2002. "Economic Growth," The Economic Record, The Economic Society of Australia, vol. 78(243), pages 375-80, December.
  7. Chamberlain, Gary, 1982. "Multivariate regression models for panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 5-46, January.
  8. David Aschauer, 1988. "Is public expenditure productive?," Staff Memoranda 88-7, Federal Reserve Bank of Chicago.
  9. Thompson, Earl A, 1974. "Taxation and National Defense," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 755-82, July/Aug..
  10. Malcolm D. Knight & Delano Villanueva & Norman Loayza, 1992. "Testing the Neoclassical Theory of Economic Growth," IMF Working Papers 92/106, International Monetary Fund.
  11. 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.
  12. Malcolm Knight & Norman Loayza & Delano Villanueva, 1993. "Testing the Neoclassical Theory of Economic Growth: A Panel Data Approach," IMF Staff Papers, Palgrave Macmillan, vol. 40(3), pages 512-541, September.
  13. Robert J. Barro & Jong-Wha Lee, 1993. "Losers and Winners in Economic Growth," NBER Working Papers 4341, National Bureau of Economic Research, Inc.
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  1. Militarism and growth
    by chris dillow in Stumbling and Mumbling on 2014-06-16 12:23:57
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