IDEAS home Printed from https://ideas.repec.org/a/ana/journl/v4y2018i2p75-94.html
   My bibliography  Save this article

The Effect of Military Expenditure on Profit Rates: Evidence from Major Countries

Author

Listed:
  • Adem Yavuz Elveren

    () (Department of Economics, History, and Political Science, Fitchburg State University)

  • Sara Hsu

    () (Department of Economics, State University of New York-New Paltz)

Abstract

This article provides evidence of the effect of military expenditures on the rate of profits by focusing on 32 major countries for the period of 1963-2008 by using data from the Extended Penn World Tables, the University of Texas Inequality Project Estimated Household Income Inequality, the World Development Indicator, and the Stockholm International Peace Research Institute. The article employs a Generalized Method of Moment model within a Marxist framework. Findings show that military expenditures have positive effect on the rate of profits. It is also showed that increasing income inequality increases the rate of profits. Finally, the findings suggest that while military expenditures have a positive effect on the profit rates in the case of both armsexporting countries and net-arms exporters, the relationship is not that significant in the case of arms-importing countries.

Suggested Citation

  • Adem Yavuz Elveren & Sara Hsu, 2018. "The Effect of Military Expenditure on Profit Rates: Evidence from Major Countries," World Journal of Applied Economics, WERI-World Economic Research Institute, vol. 4(2), pages 75-94, December.
  • Handle: RePEc:ana:journl:v:4:y:2018:i:2:p:75-94
    DOI: 10.22440/wjae.4.2.2
    as

    Download full text from publisher

    File URL: http://journal.econworld.org/index.php/econworld/article/view/105/33
    Download Restriction: no

    References listed on IDEAS

    as
    1. Abell, John D, 1990. "Defence Spending and Unemployment Rates: An Empirical Analysis Disaggregated by Race," Cambridge Journal of Economics, Oxford University Press, vol. 14(4), pages 405-419, December.
    2. Hamid Ali, 2007. "Military Expenditures And Inequality: Empirical Evidence From Global Data," Defence and Peace Economics, Taylor & Francis Journals, vol. 18(6), pages 519-535.
    3. Deininger, Klaus & Squire, Lyn, 1996. "A New Data Set Measuring Income Inequality," World Bank Economic Review, World Bank Group, vol. 10(3), pages 565-591, September.
    4. repec:mes:jeciss:v:21:y:1987:i:1:p:33-59 is not listed on IDEAS
    5. Ünal Töngür & Adem Yavuz Elveren, 2017. "The nexus of economic growth, military expenditures, and income inequality," Quality & Quantity: International Journal of Methodology, Springer, vol. 51(4), pages 1821-1842, July.
    6. repec:mes:postke:v:10:y:1987:i:2:p:310-317 is not listed on IDEAS
    7. Alptekin, Aynur & Levine, Paul, 2012. "Military expenditure and economic growth: A meta-analysis," European Journal of Political Economy, Elsevier, vol. 28(4), pages 636-650.
    8. repec:ags:stataj:122704 is not listed on IDEAS
    9. repec:mes:postke:v:10:y:1987:i:2:p:304-309 is not listed on IDEAS
    10. Elveren, Adem Yavuz & Dunning, Rachel, 2017. "Do Military Expenditures Boost Profit Rates?," MPRA Paper 81143, University Library of Munich, Germany.
    11. David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LP, vol. 9(1), pages 86-136, March.
    12. Fred M. Gottheil, 1986. "Marx versus Marxists on the Role of Military Production in Capitalist Economies," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 8(4), pages 563-573, July.
    13. Chester, Eric, 1978. "Military Spending and Capitalist Stability," Cambridge Journal of Economics, Oxford University Press, vol. 2(3), pages 293-298, September.
    14. Deininger, Klaus & Squire, Lyn, 1996. "A New Data Set Measuring Income Inequality," World Bank Economic Review, World Bank Group, vol. 10(3), pages 565-591, September.
    15. Fanny Coulomb & Renaud Bellais, 2008. "The Marxist Analysis Of War And Military Expenditures, Between Certainty And Uncertainty," Defence and Peace Economics, Taylor & Francis Journals, vol. 19(5), pages 351-359.
    16. Hartley, Keith & McLean, Pat, 1978. "Military Expenditure and Capitalism: A Comment," Cambridge Journal of Economics, Oxford University Press, vol. 2(3), pages 287-292, September.
    17. Reich, Michael, 1972. "Does the U.S. Economy Require Military Spending?," American Economic Review, American Economic Association, vol. 62(2), pages 296-303, May.
    18. Laura Carvalho & Armon Rezai, 2016. "Personal income inequality and aggregate demand," Cambridge Journal of Economics, Oxford University Press, vol. 40(2), pages 491-505.
    19. Dunne, Paul, 1990. "The Political Economy of Military Expenditure: An Introduction," Cambridge Journal of Economics, Oxford University Press, vol. 14(4), pages 395-404, December.
    20. Pivetti, Massimo, 1992. "Military Spending as a Burden on Growth: An 'Underconsumptionist' Critique," Cambridge Journal of Economics, Oxford University Press, vol. 16(4), pages 373-384, December.
    21. Smith, R P, 1977. "Military Expenditure and Capitalism," Cambridge Journal of Economics, Oxford University Press, vol. 1(1), pages 61-76, March.
    22. Elveren, Adem Yavuz & Özgür, Gökçer, 2018. "The Effect of Military Expenditures on the Profit Rates in Turkey," MPRA Paper 88848, University Library of Munich, Germany.
    23. Amitava Krishna Dutt, 2006. "Maturity, Stagnation And Consumer Debt: A Steindlian Approach," Metroeconomica, Wiley Blackwell, vol. 57(3), pages 339-364, July.
    24. Adem Y. Elveren & Sara Hsu, 2016. "Military Expenditures and Profit Rates: Evidence from OECD Countries," Metroeconomica, Wiley Blackwell, vol. 67(3), pages 551-577, July.
    25. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
    26. Dumitrescu, Elena-Ivona & Hurlin, Christophe, 2012. "Testing for Granger non-causality in heterogeneous panels," Economic Modelling, Elsevier, vol. 29(4), pages 1450-1460.
    27. Renaud Bellais & Fanny Coulomb, 2008. "The Marxist analysis of war and military expenditures, between certainty and uncertainty," Post-Print hal-01053853, HAL.
    28. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    29. repec:bla:metroe:v:67:y:2016:i:2:p:397-428 is not listed on IDEAS
    30. Smith, Ron P, 1978. "Military Expenditure and Capitalism: A Reply," Cambridge Journal of Economics, Oxford University Press, vol. 2(3), pages 299-304, September.
    31. Pivetti, Massimo, 1994. "Effective Demand, 'Marxo-Marginalism' and the Economics of Military Spending: Rejoinder," Cambridge Journal of Economics, Oxford University Press, vol. 18(5), pages 523-527, October.
    32. Thomas I. Palley, 2002. "Economic contradictions coming home to roost? Does the U.S. economy face a long-term aggregate demand generation problem?," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 25(1), pages 9-32.
    33. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-1426, November.
    34. Deepankar Basu & Ramaa Vasudevan, 2013. "Technology, distribution and the rate of profit in the US economy: understanding the current crisis," Cambridge Journal of Economics, Oxford University Press, vol. 37(1), pages 57-89.
    35. Magdoff, Harry, 1970. "Militarism and Imperialism," American Economic Review, American Economic Association, vol. 60(2), pages 237-242, May.
    36. Töngür, Ünal & Hsu, Sara & Elveren, Adem Yavuz, 2015. "Military expenditures and political regimes: Evidence from global data, 1963–2000," Economic Modelling, Elsevier, vol. 44(C), pages 68-79.
    37. Christos Kollias & Thanasis Maniatis, 2003. "Military expenditure and the profit rate in Greece," Defence and Peace Economics, Taylor & Francis Journals, vol. 14(2), pages 117-127.
    38. Smith, Ronald P., 1980. "Military expenditure and investment in OECD countries, 1954-1973," Journal of Comparative Economics, Elsevier, vol. 4(1), pages 19-32, March.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Military expenditure; Profit rate; Income inequality; Panel data; Marxist economics;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ana:journl:v:4:y:2018:i:2:p:75-94. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Unal Tongur). General contact details of provider: http://edirc.repec.org/data/ewanatr.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.