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'Guns Or Butter?' Revisited: Robustness And Nonlinearity Issues In The Defense-Growth Nexus

  • Jesús Crespo Cuaresma
  • Gerhard Reitschuler

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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Article provided by Scottish Economic Society in its journal Scottish Journal of Political Economy.

Volume (Year): 53 (2006)
Issue (Month): 4 (09)
Pages: 523-541

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Handle: RePEc:bla:scotjp:v:53:y:2006:i:4:p:523-541
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