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Military Expenditure And Economic Growth

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  • Luca Pieroni

Abstract

This paper tests the relationship between military expenditure and economic growth by including the impact of the share of military and civilian components of government expenditure in an economic growth model with endogenous technology. In this framework, we empirically consider the hypothesis of a non-linear effect of military expenditure on economic growth. Differences between the costs and benefits of the defence sector has traditionally explained the non-linear relationship suggesting that shocks to insecurity may also be a source of non-linearity as they determine a re-allocative effect within government expenditure. While parametric partial correlations are in line with empirical findings, the robustness of estimations is tested by using a non-parametric approach. The negative relationship between military expenditure and growth in countries with high levels of military burden predicted by theory becomes significant only after including a proxy for re-allocative effects in the growth equation.

Suggested Citation

  • Luca Pieroni, 2009. "Military Expenditure And Economic Growth," Defence and Peace Economics, Taylor & Francis Journals, vol. 20(4), pages 327-339.
  • Handle: RePEc:taf:defpea:v:20:y:2009:i:4:p:327-339 DOI: 10.1080/10242690701589876
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    Cited by:

    1. Ryan A. Compton & Bryan Paterson, 2016. "Military Spending and Growth: The Role of Institutions," Defence and Peace Economics, Taylor & Francis Journals, pages 301-322.
    2. Tiwari, Aviral & Shahbaz, Muhammad, 2011. "Does Defence Spending Stimulate Economic Growth in India?," MPRA Paper 30880, University Library of Munich, Germany, revised 18 Apr 2011.
    3. Ý. Hakan Yetkiner, 2012. "Defense Spending and Economic Growth:A Theoretical Manifestation for Empirical Studies," Working Papers 1202, Izmir University of Economics.
    4. Vincenzo Bove & Roberto Nisticò, 2014. "Coups d’état and defense spending: a counterfactual analysis," Public Choice, Springer, vol. 161(3), pages 321-344, December.
    5. Sefa Awaworyi & Siew Ling Yew, 2014. "The Effect of Military Expenditure on Growth: An Empirical Synthesis," Monash Economics Working Papers 25-14, Monash University, Department of Economics.
    6. Shahbaz, Muhammad & Leitão, Nuno Carlos & Uddin, Gazi Salah & Arouri, Mohamed & Teulon, Frédéric, 2013. "Should Portuguese economy invest in defense spending? A revisit," Economic Modelling, Elsevier, vol. 35(C), pages 805-815.
    7. J Paul Dunne, 2011. "Military Keynesianism: An Assessment," Working Papers 1106, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    8. Bove, Vincenzo & Nisticò, Roberto, 2014. "Military in politics and budgetary allocations," Journal of Comparative Economics, Elsevier, pages 1065-1078.
    9. Cosimo Magazzino & Lorenzo Giolli & Marco Mele, 2015. "Wagner’s Law and Peacock and Wiseman’s Displacement Effect in European Union Countries: A Panel Data Study," International Journal of Economics and Financial Issues, Econjournals, pages 812-819.
    10. repec:spr:scient:v:112:y:2017:i:3:d:10.1007_s11192-017-2443-6 is not listed on IDEAS
    11. J Paul Dunne & Ron P. Smith, 2010. "Military Expenditure and Granger Causality: A Critical Review," Working Papers 1007, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    12. Goodness C. Aye & Mehmet Balcilar & John P. Dunne & Rangan Gupta & Reneé van Eyden, 2014. "Military expenditure, economic growth and structural instability: a case study of South Africa," Defence and Peace Economics, Taylor & Francis Journals, pages 619-633.
    13. d'Agostino, Giorgio & Dunne, John Paul & Pieroni, Luca, 2013. "Military Expenditure, Endogeneity and Economic Growth," MPRA Paper 45640, University Library of Munich, Germany.
    14. Dincă Marius Sorin & Dincă Gheorghița, 2013. "The Impact of Government Expenditures upon Economic Growth in Post-Communist Countries," Scientific Annals of Economics and Business, De Gruyter Open, pages 126-134.
    15. repec:ipg:wpaper:2014-380 is not listed on IDEAS
    16. Goodness C. Aye & Mehmet Balcilar & John P. Dunne & Rangan Gupta & Reneé van Eyden, 2014. "Military expenditure, economic growth and structural instability: a case study of South Africa," Defence and Peace Economics, Taylor & Francis Journals, pages 619-633.
    17. Suna Korkmaz, 2015. "The Effect of Military Spending on Economic Growth and Unemployment in Mediterranean Countries," International Journal of Economics and Financial Issues, Econjournals, pages 273-280.
    18. Muhammad Shahbaz & Talat Afza & Muhammad Shahbaz Shabbir, 2013. "Does Defence Spending Impede Economic Growth? Cointegration And Causality Analysis For Pakistan," Defence and Peace Economics, Taylor & Francis Journals, pages 105-120.
    19. Chen, Pei-Fen & Lee, Chien-Chiang & Chiu, Yi-Bin, 2014. "The nexus between defense expenditure and economic growth: New global evidence," Economic Modelling, Elsevier, vol. 36(C), pages 474-483.
    20. J Paul Dunne & Mehmet Uye, 2009. "Military Spending and Development," Working Papers 0902, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.

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