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Does Nation Building Spur Economic Growth?

Author

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  • Ellyn Creasey
  • Ahmed S. Rahman
  • Katherine A. Smith

Abstract

Nation building, the allocation of economic aid conditional on military assistance in conflict and post‐conflict environments, has cost the world trillions of dollars over the last half century. Yet few attempts have been made to quantify the potential economic growth effects for the recipient country from the provision of this aid. Using a 45‐year panel dataset, we construct a measure of nation building using a three‐way interaction term between military assistance, economic aid, and conflict regime. Considering that slow growing and problem‐prone countries may be less likely to receive aid, we instrument for economic aid by estimating donor‐to‐donee aid flows in a first‐stage procedure. Using this approach, we find that spending on nation building has positive growth effects during conflict periods, but that these effects disappear after conflict. (JEL F3, F4, O5)

Suggested Citation

  • Ellyn Creasey & Ahmed S. Rahman & Katherine A. Smith, 2015. "Does Nation Building Spur Economic Growth?," Economic Inquiry, Western Economic Association International, vol. 53(1), pages 660-680, January.
    • Handle: RePEc:bla:ecinqu:v:53:y:2015:i:1:p:660-680
    DOI: 10.1111/ecin.12148
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Nation building and economic growth
      by Economic Logician in Economic Logic on 2012-02-28 21:28:00

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    Cited by:

    1. Milan Zafirovski, 2020. "Indicators of Militarism and Democracy in Comparative Context: How Militaristic Tendencies Influence Democratic Processes in OECD Countries 2010–2016," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 147(1), pages 159-202, January.
    2. Insler, Michael A. & McMurrey, Bryce & McQuoid, Alexander F., 2019. "From broken windows to broken bonds: Militarized police and social fragmentation," Journal of Economic Behavior & Organization, Elsevier, vol. 163(C), pages 43-62.
    3. Axel Dreher & Vera Eichenauer & Kai Gehring & Vera Z. Eichenauer, 2013. "Geopolitics, Aid and Growth," CESifo Working Paper Series 4299, CESifo.
    4. Sung-Ko Li & Chun-Kei Tsang, 2018. "The Impacts Of Biased Resource Allocation On The Effectiveness Of Official Development Assistance," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 65(01), pages 239-256, July.
    5. Dutta, Nabamita & Williamson, Claudia R., 2016. "Aiding economic freedom: Exploring the role of political institutions," European Journal of Political Economy, Elsevier, vol. 45(S), pages 24-38.
    6. Alexander F. McQuoid & J. Britton Haynes Jr., 2017. "The Thin (Red) Blue Line: Police Militarization and Violent Crime," Departmental Working Papers 56, United States Naval Academy Department of Economics.

    More about this item

    JEL classification:

    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies

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