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Military Spending and Stochastic Growth: A Small Open Economy

Listed author(s):
  • Cheng-te Lee

    ()

    (Department of International Trade, Chinese Culture University, Taiwan)

  • Shang-fen Wu

    ()

    (Department of International Business, Chinese Culture University, Taiwan)

Registered author(s):

    In a stochastic endogenous growth model, the effects of military spending on economic growth are explored. In addition to the traditional crowding-out effect, we show that the portfolio effect also plays an importance role in determining growth rate in a small open economy. We find that there exists a non-linear relationship between the defense burden and the economic growth.

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    File URL: http://www.accessecon.com/Pubs/EB/2015/Volume35/EB-15-V35-I4-P207.pdf
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    Article provided by AccessEcon in its journal Economics Bulletin.

    Volume (Year): 35 (2015)
    Issue (Month): 4 ()
    Pages: 2026-2036

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    Handle: RePEc:ebl:ecbull:eb-15-00623
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    1. Ching-chong Lai & Jhy-yuan Shieh & Wen-Ya Chang, 2002. "Endogenous Growth and Defense Expenditures: A New Explanation of the Benoit Hypothesis," Defence and Peace Economics, Taylor & Francis Journals, vol. 13(3), pages 179-186.
    2. Landau, Daniel, 1993. "The economic impact of military expenditures," Policy Research Working Paper Series 1138, The World Bank.
    3. Stephen J. Turnovsky, 2000. "Methods of Macroeconomic Dynamics, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262201232, July.
    4. Gong, Liutang & Zou, Heng-fu, 2003. "Military spending and stochastic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 28(1), pages 153-170, October.
    5. Shieh, Jhy-yuan & Lai, Ching-chong & Chang, Wen-ya, 2002. "The impact of military burden on long-run growth and welfare," Journal of Development Economics, Elsevier, vol. 68(2), pages 443-454, August.
    6. Zou, Heng-fu, 1995. "A dynamic model of capital and arms accumulation," Journal of Economic Dynamics and Control, Elsevier, vol. 19(1-2), pages 371-393.
    7. Landau, Daniel, 1996. "Is one of the 'peace dividends' negative? Military expenditure and economic growth in the wealthy OECD countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 36(2), pages 183-195.
    8. Karl R. DeRouen Jr., 1995. "Arab-Israeli Defense Spending and Economic Growth," Conflict Management and Peace Science, Peace Science Society (International), vol. 14(1), pages 25-47, February.
    9. Po‐Sheng Lin & Cheng‐Te Lee, 2012. "Military Spending, Threats And Stochastic Growth," Bulletin of Economic Research, Wiley Blackwell, vol. 64(1), pages 8-19, 01.
    10. Benoit, Emile, 1978. "Growth and Defense in Developing Countries," Economic Development and Cultural Change, University of Chicago Press, vol. 26(2), pages 271-280, January.
    11. Jhy-Yuan Shieh & Wen-Ya Chang & Ching-Chong Lai, 2007. "An Endogenous Growth Model Of Capital And Arms Accumulation," Defence and Peace Economics, Taylor & Francis Journals, vol. 18(6), pages 557-575.
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