IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/9618.html
   My bibliography  Save this paper

Military Expenditure, Threats, and Growth

Author

Listed:
  • Joshua Aizenman
  • Reuven Glick

Abstract

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.

Suggested Citation

  • Joshua Aizenman & Reuven Glick, 2003. "Military Expenditure, Threats, and Growth," NBER Working Papers 9618, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:9618
    Note: EFG ITI
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w9618.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. 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.
    2. 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.
    3. 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 103-126, October.
    4. Gupta, Sanjeev & de Mello, Luiz & Sharan, Raju, 2001. "Corruption and military spending," European Journal of Political Economy, Elsevier, vol. 17(4), pages 749-777, November.
    5. 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.
    6. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 407-443.
    7. 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.
    8. Stergios Skaperdas, 1996. "Contest success functions (*)," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 7(2), pages 283-290.
    9. van Wijnbergen, Sweder J G, 1984. "The 'Dutch Disease': A Disease after All?," Economic Journal, Royal Economic Society, vol. 94(373), pages 41-55, March.
    10. 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.
    11. James C. Murdoch & Todd Sandler, 2002. "Economic Growth, Civil Wars, and Spatial Spillovers," Journal of Conflict Resolution, Peace Science Society (International), vol. 46(1), pages 91-110, February.
    12. Mr. John Wakeman-Linn & Ms. Nancy Louise Happe, 1994. "Military Expenditure and Arms Trade: Alternative Data Sources," IMF Working Papers 1994/069, International Monetary Fund.
    13. Sandler,Todd & Hartley,Keith, 1995. "The Economics of Defense," Cambridge Books, Cambridge University Press, number 9780521447287, December.
    14. By Davoodi & Benedict Clements & Jerald Schiff & Peter Debaere, 2001. "Military Spending, the Peace Dividend, and Fiscal Adjustment," IMF Staff Papers, Palgrave Macmillan, vol. 48(2), pages 1-4.
    15. Mr. Vito Tanzi & Mr. Hamid R Davoodi, 1997. "Corruption, Public Investment, and Growth," IMF Working Papers 1997/139, International Monetary Fund.
    16. Paolo Mauro, 1995. "Corruption and Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 681-712.
    17. 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.
    18. International Monetary Fund, 2000. "Corruption and Military Spending," IMF Working Papers 2000/023, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alptekin, Aynur & Levine, Paul, 2012. "Military expenditure and economic growth: A meta-analysis," European Journal of Political Economy, Elsevier, vol. 28(4), pages 636-650.
    2. Garfinkel, Michelle R. & Skaperdas, Stergios (ed.), 2012. "The Oxford Handbook of the Economics of Peace and Conflict," OUP Catalogue, Oxford University Press, number 9780195392777.
    3. Julien Malizard, 2014. "Dépenses militaires et croissance économique dans un contexte non linéaire. Le cas français," Revue économique, Presses de Sciences-Po, vol. 65(3), pages 601-618.
    4. Ünal Töngür & Adem Yavuz Elveren, 2017. "The nexus of economic growth, military expenditures, and income inequality," Quality & Quantity: International Journal of Methodology, Springer, vol. 51(4), pages 1821-1842, July.
    5. Ünal Töngür & Adem Yavuz Elveren, 2015. "The Nexus of Economic Growth, Military Expenditures and Income Inequality," EY International Congress on Economics II (EYC2015), November 5-6, 2015, Ankara, Turkey 208, Ekonomik Yaklasim Association.
    6. Zied Akrout, 2020. "Corruption and Economic Growth In Tunisia: Direct or Indirect Effects?," International Journal of Economics and Financial Issues, Econjournals, vol. 10(6), pages 31-39.
    7. Giorgio d'Agostino & Luca Pieroni & J Paul Dunne, 2010. "Assessing the Effects of Military Expenditure on Growth," Working Papers 1012, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    8. Adnan Haider & Musleh ud Din & Ejaz Ghani, 2011. "Consequences of Political Instability, Governance and Bureaucratic Corruption on Inflation and Growth: The Case of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 50(4), pages 773-807.
    9. Collier, Paul & Hoeffler, Anke, 2002. "Military expenditure - threats, aid, and arms races," Policy Research Working Paper Series 2927, The World Bank.
    10. Knobel, Alexander (Кнобель, Александр) & Chokaev, Bekhan (Чокаев, Бекхан) & Mironov, Alexey (Миронов, Алексей), 2015. "Comparative Analysis of the Effectiveness of Public Spending in the Field of National Defense and Law Enforcement [Сравнительный Анализ Эффективности Госрасходов В Сфере Национальной Обороны И Прав," Published Papers mn47, Russian Presidential Academy of National Economy and Public Administration.
    11. Mr. Benedict J. Clements & Mr. Sanjeev Gupta & Shamit Chakravarti & Ms. Rina Bhattacharya, 2002. "Fiscal Consequences of Armed Conflict and Terrorism in Low- and Middle-Income Countries," IMF Working Papers 2002/142, International Monetary Fund.
    12. Chang, Hsin-Chen & Huang, Bwo-Nung & Yang, Chin Wei, 2011. "Military expenditure and economic growth across different groups: A dynamic panel Granger-causality approach," Economic Modelling, Elsevier, vol. 28(6), pages 2416-2423.
    13. Pavel Yakovlev, 2007. "Arms Trade, Military Spending, And Economic Growth," Defence and Peace Economics, Taylor & Francis Journals, vol. 18(4), pages 317-338.
    14. Sefa Awaworyi Churchill & Mehmet Ugur & Siew Ling Yew, 2017. "Does Government Size Affect Per-Capita Income Growth? A Hierarchical Meta-Regression Analysis," The Economic Record, The Economic Society of Australia, vol. 93(300), pages 142-171, March.
    15. Stergios Skaperdas, 2011. "The costs of organized violence: a review of the evidence," Economics of Governance, Springer, vol. 12(1), pages 1-23, March.
    16. Giorgio d’Agostino & John Paul Dunne & Luca Pieroni, 2019. "Military Expenditure, Endogeneity and Economic Growth," Defence and Peace Economics, Taylor & Francis Journals, vol. 30(5), pages 509-524, July.
    17. Kimbambu Tsasa Vangu, Jean - Paul, 2012. "Analyse de la Relation Guerres Civiles et Croissance Économique [Civil Wars and Economic Growth in DRC]," MPRA Paper 42424, University Library of Munich, Germany, revised 05 Feb 2012.
    18. Hsien-Hung Kung & Jennifer C. H. Min, 2013. "Military Spending and Economic Growth Nexus in Sixteen Latin and South American Countries: A Bootstrap Panel Causality Test," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 171-185, December.
    19. Jülide Yildirim & Nadir Öcal, 2016. "Military expenditures, economic growth and spatial spillovers," Defence and Peace Economics, Taylor & Francis Journals, vol. 27(1), pages 87-104, February.
    20. Nikolaos Mylonidis, 2008. "Revisiting The Nexus Between Military Spending And Growth In The European Union," Defence and Peace Economics, Taylor & Francis Journals, vol. 19(4), pages 265-272.

    More about this item

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:9618. 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: . General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.