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Optimal military spending in the US: A time series analysis

  • d'Agostino, G.
  • Dunne, J.P.
  • Pieroni, L.

This paper extends previous work on the optimal size of government spending by including nested functional decompositions of military spending into consumption and investment. Post World War II US data are then used to estimate nested non-linear growth models using semi-parametric methods. As expected, investments in military and non-military expenditure are both found to be productive expenditures with respect to the private production. Moreover there is little evidence to suggest that current military spending is having a negative impact on economic growth in the US, while civilian consumption only tends to have only a weak impact. This does not imply that society will necessarily benefit from a reallocation of more spending to the military sector, nor that it is the best way to achieve economic growth.

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Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 28 (2011)
Issue (Month): 3 (May)
Pages: 1068-1077

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Handle: RePEc:eee:ecmode:v:28:y:2011:i:3:p:1068-1077
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  1. Sandler, Todd & Hartley, Keith, 2007. "Defense in a Globalized World: An Introduction," Handbook of Defense Economics, Elsevier.
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  7. Robert J. Barro, 1988. "Government Spending in a Simple Model of Endogenous Growth," NBER Working Papers 2588, National Bureau of Economic Research, Inc.
  8. 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.
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  17. Timothy J. Vogelsang, 1998. "Trend Function Hypothesis Testing in the Presence of Serial Correlation," Econometrica, Econometric Society, vol. 66(1), pages 123-148, January.
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