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Lost Productivity and Defense Burden of the Southern Cone of Latin America: A Page from History

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  • Marwah Kanta

    () (Carleton University)

  • Klein Lawrence R.

    (University of Pennsylvania)

Abstract

An attempt is made to measure the loss of productivity and growth due to excessive military expenditures of five countries in the Southern Cone of Latin America during the 1970's and 1980's. These countries are Argentina, Bolivia, Chile, Paraguay and Peru. A transcendental production function that incorporates a ratio of military expenditures to GDP as a separate input factor is estimated for each country. The elasticity coefficients demonstrate a significant trade-off between military and nonmilitary spending from the supply side. For every one percentage aggregate growth point, growth of military share saps 0.048 in Argentina, 0.013 in Bolivia, 0.043 in Chile, 0.173 in Paraguay, and 0.071 in Peru. A counterfactual new scenario is simulated by reducing military shares of GDP to one percent. The results show that these five countries lost on an average 1.5 percent of growth due to excessive defense burden during 1971-1991.

Suggested Citation

  • Marwah Kanta & Klein Lawrence R., 2005. "Lost Productivity and Defense Burden of the Southern Cone of Latin America: A Page from History," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 11(1), pages 1-30, May.
  • Handle: RePEc:bpj:pepspp:v:11:y:2005:i:1:n:1
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    References listed on IDEAS

    as
    1. Dakurah, A. Henry & Davies, Stephen P. & Sampath, Rajan K., 2001. "Defense spending and economic growth in developing countries: A causality analysis," Journal of Policy Modeling, Elsevier, vol. 23(6), pages 651-658, August.
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    Cited by:

    1. Sevastianova Daria, 2009. "Impact of War on Country per Capita GDP: A Descriptive Analysis," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 15(1), pages 1-28, December.
    2. Sakiru Adebola Solarin, 2016. "Sources of labour productivity: a panel investigation of the role of military expenditure," Quality & Quantity: International Journal of Methodology, Springer, vol. 50(2), pages 849-865, March.
    3. Raul Caruso, 2015. "Beyond deterrence and decline. Towards a general understanding of peace economics," Rivista Internazionale di Scienze Sociali, Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore, vol. 128(1), pages 57-74.
    4. Ali Hamid E., 2011. "Military Expenditures and Human Development: Guns and Butter Arguments Revisited: A Case Study from Egypt," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 17(1), pages 1-21, September.
    5. Hicks Michael J. & Smith Jeff, 2009. "Warfare, Civil Conflict and the Spatial Impacts on Domestic Investment: Evidence from South America, 1950-2000," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 15(1), pages 1-14, November.
    6. Yamarik Steven J & Johnson Noel D & Compton Ryan A, 2010. "War! What Is It Good For? A Deep Determinants Analysis of the Cost of Interstate Conflict," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 16(1), pages 1-35, September.

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