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Government Expenditures, Military Spending and Economic Growth: Causality Evidence from Egypt, Israel and Syria

  • Suleiman Abu-Bader

    ()

    (Department of Economics, Ben-Gurion University of the Negev)

  • Aamer Abu-Qarn

    ()

    (Department of Economics, Ben-Gurion University of the Negev)

This study uses multivariate cointegration and variance decomposition techniques to investigate the causal relationship between government expenditures and economic growth for Egypt, Israel and Syria, for the past three decades. When testing for causality within a bivariate system of total government spending and economic growth, we find bi-directional causality from government spending to economic growth with a negative long-term relationship between the two variables. However, when testing for causality within a trivariate system ¬– the share of government civilian expenditures in GDP, military burden and economic growth – we find that the military burden negatively affects economic growth for all the countries, and that civilian government expenditures cause positive economic growth in Israel and Egypt.

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File URL: http://in.bgu.ac.il/en/humsos/Econ/Working/163.pdf
File Function: First version, 2003
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Paper provided by Ben-Gurion University of the Negev, Department of Economics in its series Working Papers with number 163.

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Length: 25 pages
Date of creation: 2003
Date of revision:
Publication status: Published in Journal of Policy Modeling, 25(6-7), September 2003, pages 567-583
Handle: RePEc:bgu:wpaper:163
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  12. Ahsan, Syed M & Kwan, Andy C C & Sahni, Balbir S, 1989. "Causality between Government Consumption Expenditure and National Income: OECD Countries," Public Finance = Finances publiques, , vol. 44(2), pages 204-24.
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  19. Lim, David, 1983. "Another Look at Growth and Defense in Less Developed Countries," Economic Development and Cultural Change, University of Chicago Press, vol. 31(2), pages 377-84, January.
  20. Faini, Riccardo & Annez, Patricia & Taylor, Lance, 1984. "Defense Spending, Economic Structure, and Growth: Evidence among Countries and Over Time," Economic Development and Cultural Change, University of Chicago Press, vol. 32(3), pages 487-98, April.
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  22. Ram, Rati, 1986. "Government Size and Economic Growth: A New Framework and Some Evidencefrom Cross-Section and Time-Series Data," American Economic Review, American Economic Association, vol. 76(1), pages 191-203, March.
  23. 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.
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