Military Expenditure, Threats, and Growth
This paper clarifies one of the puzzling results of the economic growth literature: the impact of military expenditure is frequently found to be non-significant or negative, yet most countries spend a large fraction of their GDP on defense and the military. We start by empirical evaluation of the non-linear interactions between military expenditure, external threats, corruption, and other relevant controls. While growth falls with higher levels of military spending, given the values of the other independent variables, we show that military expenditure in the presence of threats increases growth. We explain the presence of these non-linearities in an extended version of Barro and Sala-i-Martin (1995), allowing the dependence of growth on the severity of external threats, and on the effective military expenditure associated with these threats.
|Date of creation:||01 Sep 2003|
|Date of revision:|
|Contact details of provider:|| Postal: Santa Cruz, CA 95064|
Phone: (831) 459-2743
Fax: (831) 459-5077
Web page: http://www.escholarship.org/repec/ucscecon/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Stergios Skaperdas, 1996.
"Contest success functions (*),"
Springer;Society for the Advancement of Economic Theory (SAET), vol. 7(2), pages 283-290.
- Knight, Malcolm & Loayza, Norman & Villanueva, Delano, 1996.
"The peace dividend : military spending cuts and economic growth,"
Policy Research Working Paper Series
1577, The World Bank.
- Malcolm Knight & Norman Loayza & Delano Villanueva, 1996. "The Peace Dividend: Military Spending Cuts and Economic Growth," IMF Staff Papers, Palgrave Macmillan, vol. 43(1), pages 1-37, March.
- Malcolm D. Knight & Delano Villanueva & Norman Loayza, 1995. "The Peace Dividend; Military Spending Cuts and Economic Growth," IMF Working Papers 95/53, International Monetary Fund.
- Vito Tanzi & Hamid R Davoodi, 1997. "Corruption, Public Investment, and Growth," IMF Working Papers 97/139, International Monetary Fund.
- Hirshleifer, Jack, 1995. "Theorizing about conflict," Handbook of Defense Economics, in: Keith Hartley & Todd Sandler (ed.), Handbook of Defense Economics, edition 1, volume 1, chapter 7, pages 165-189 Elsevier.
- Barro, R.J., 1988.
"Government Spending In A Simple Model Of Endogenous Growth,"
RCER Working Papers
130, University of Rochester - Center for Economic Research (RCER).
- Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S103-26, October.
- Robert J. Barro, 1988. "Government Spending in a Simple Model of Endogenous Growth," NBER Working Papers 2588, National Bureau of Economic Research, Inc.
- Barro, Robert J., 1990. "Government Spending in a Simple Model of Endogeneous Growth," Scholarly Articles 3451296, Harvard University Department of Economics.
- International Monetary Fund, 2000. "Corruption and Military Spending," IMF Working Papers 00/23, International Monetary Fund.
- Jack Hirshleifer, 1995. "Theorizing About Conflict," UCLA Economics Working Papers 727, UCLA Department of Economics.
- 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.
- Barro, R.J., 1989.
"Economic Growth In A Cross Section Of Countries,"
RCER Working Papers
201, University of Rochester - Center for Economic Research (RCER).
- Robert J. Barro, 1989.
"A Cross-Country Study of Growth, Saving, and Government,"
NBER Working Papers
2855, National Bureau of Economic Research, Inc.
- Robert J. Barro, 1991. "A Cross-Country Study of Growth, Saving, and Government," NBER Chapters, in: National Saving and Economic Performance, pages 271-304 National Bureau of Economic Research, Inc.
- Paul Dunne & Sam Perlo-Freeman, 2003. "The Demand for Military Spending in Developing Countries," International Review of Applied Economics, Taylor & Francis Journals, vol. 17(1), pages 23-48.
- Ram, Rati, 1995. "Defense expenditure and economic growth," Handbook of Defense Economics, in: Keith Hartley & Todd Sandler (ed.), Handbook of Defense Economics, edition 1, volume 1, chapter 10, pages 251-274 Elsevier.
- Paolo Mauro, 1995. "Corruption and Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 681-712.
- John Wakeman-Linn & Nancy Louise Happe, 1994. "Military Expenditure and Arms Trade; Alternative Data Sources," IMF Working Papers 94/69, International Monetary Fund.
When requesting a correction, please mention this item's handle: RePEc:cdl:ucscec:qt41r4105h. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lisa Schiff)
If references are entirely missing, you can add them using this form.