IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/59783.html
   My bibliography  Save this paper

Military Spending and Growth: An Empirical Exploration of Contingent Relationships

Author

Listed:
  • Musayev, Vusal

Abstract

This analysis clarifies the ambiguous results from military spending and economic growth literature where the impact of military expenditure is frequently found to be non-significant or negative. Investigation re-examines effects of military spending on growth by analysing this relationship contingent on initial income per capita using recent advances in panel estimation methods and unique dataset on military expenditure. The findings reveal that while growth falls with higher levels of military spending, the marginal impact of military spending is increasing in initial income levels. In contrast to previous findings from the literature, this increase is consistent across different income groups and type of economies, and monotonic in direction going towards zero for sufficiently higher income level countries.

Suggested Citation

  • Musayev, Vusal, 2013. "Military Spending and Growth: An Empirical Exploration of Contingent Relationships," MPRA Paper 59783, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:59783
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/59783/1/MPRA_paper_59783.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. anonymous, 1995. "Does the bouncing ball lead to economic growth?," Regional Update, Federal Reserve Bank of Atlanta, issue Jul, pages 1-2,4-6.
    2. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
    3. Robert J. Barro, 2013. "Inflation and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 14(1), pages 121-144, May.
    4. Johnson, Simon & Larson, William & Papageorgiou, Chris & Subramanian, Arvind, 2013. "Is newer better? Penn World Table Revisions and their impact on growth estimates," Journal of Monetary Economics, Elsevier, vol. 60(2), pages 255-274.
    5. 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.
    6. David Roodman, 2009. "A Note on the Theme of Too Many Instruments," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(1), pages 135-158, February.
    7. David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LLC, vol. 9(1), pages 86-136, March.
    8. William Hauk & Romain Wacziarg, 2009. "A Monte Carlo study of growth regressions," Journal of Economic Growth, Springer, vol. 14(2), pages 103-147, June.
    9. Joshua Aizenman & Reuven Glick, 2006. "Military expenditure, threats, and growth," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 15(2), pages 129-155.
    10. John Paul Dunne, 2012. "Military Spending, Growth, Development And Conflict," Defence and Peace Economics, Taylor & Francis Journals, vol. 23(6), pages 549-557, December.
    11. Benoit, Emile, 1978. "Growth and Defense in Developing Countries," Economic Development and Cultural Change, University of Chicago Press, vol. 26(2), pages 271-280, January.
    12. Xavier Sala-I-Martin, 1997. "Transfers, Social Safety Nets, and Economic Growth," IMF Staff Papers, Palgrave Macmillan, vol. 44(1), pages 81-102, March.
    13. Caselli, Francesco & Esquivel, Gerardo & Lefort, Fernando, 1996. "Reopening the Convergence Debate: A New Look at Cross-Country Growth Empirics," Journal of Economic Growth, Springer, vol. 1(3), pages 363-389, September.
    14. J. Paul Dunne & Nan Tian, 2015. "Military Expenditure, Economic Growth and Heterogeneity," Defence and Peace Economics, Taylor & Francis Journals, vol. 26(1), pages 15-31, February.
    15. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 407-437.
    16. J. Paul Dunne & Ron Smith & Dirk Willenbockel, 2005. "Models Of Military Expenditure And Growth: A Critical Review," Defence and Peace Economics, Taylor & Francis Journals, vol. 16(6), pages 449-461.
    17. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    18. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    19. David Roodman, 2006. "How to Do xtabond2," North American Stata Users' Group Meetings 2006 8, Stata Users Group.
    20. David N. DeJong & Marla Ripoll, 2006. "Tariffs and Growth: An Empirical Exploration of Contingent Relationships," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 625-640, November.
    21. 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.
    22. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    23. Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, vol. 126(1), pages 25-51, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Natalia Utrero-González & Jana Hromcová & Francisco J. Callado-Muñoz, 2019. "Defence Spending, Institutional Environment and Economic Growth: Case of NATO," Defence and Peace Economics, Taylor & Francis Journals, vol. 30(5), pages 525-548, July.
    2. Rabnawaz, Ambar & Jafar, Rana Muhammad Sohail, 2015. "Impact of Public Investment on Economic Growth," MPRA Paper 70377, University Library of Munich, Germany.
    3. Vusal Musayev, 2016. "Externalities in Military Spending and Growth: The Role of Natural Resources as a Channel through Conflict," Defence and Peace Economics, Taylor & Francis Journals, vol. 27(3), pages 378-391, June.

    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. Vusal Musayev, 2016. "Externalities in Military Spending and Growth: The Role of Natural Resources as a Channel through Conflict," Defence and Peace Economics, Taylor & Francis Journals, vol. 27(3), pages 378-391, June.
    2. Hou Na & Chen Bo, 2014. "Military Spending and Economic Growth in An Augmented Solow Model: A Panel Data Investigation for OECD Countries," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 20(3), pages 395-409, August.
    3. Na Hou & Bo Chen, 2013. "Military Expenditure And Economic Growth In Developing Countries: Evidence From System Gmm Estimates," Defence and Peace Economics, Taylor & Francis Journals, vol. 24(3), pages 183-193, June.
    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. Ekrame Boubtane & Jean-Christophe Dumont & Christophe Rault, 2016. "Immigration and economic growth in the OECD countries 1986–2006," Oxford Economic Papers, Oxford University Press, vol. 68(2), pages 340-360.
    6. Thomas Gries & Rainer Grundmann, 2020. "Modern sector development: The role of exports and institutions in developing countries," Review of Development Economics, Wiley Blackwell, vol. 24(2), pages 644-667, May.
    7. Ekrame Boubtane & Jean-Christophe Dumont & Christophe Rault, 2016. "Document de Recherche du Laboratoire d'Économie d'Orléans "Immigration and economic growth in the OECD countries 1986- 2006" [Document de Recherche du Laboratoire d'Economie d'Orléans &qu," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01252165, HAL.
    8. Ekrame Boubtane & Jean-Christophe Dumont & Christophe Rault, 2016. "Immigration and economic growth in the OECD countries 1986–2006," Oxford Economic Papers, Oxford University Press, vol. 68(2), pages 340-360.
    9. Ekrame BOUBTANE & Jean-Christophe DUMONT & Christophe RAULT, 2015. "Immigration and Economic Growth in the OECD Countries 1986-2006," LEO Working Papers / DR LEO 2235, Orleans Economics Laboratory / Laboratoire d'Economie d'Orleans (LEO), University of Orleans.
    10. Vu, K.M., 2017. "Structural change and economic growth: Empirical evidence and policy insights from Asian economies," Structural Change and Economic Dynamics, Elsevier, vol. 41(C), pages 64-77.
    11. Thomas Gries & Rainer Grundmann, 2014. "Trade and fertility in the developing world: the impact of trade and trade structure," Journal of Population Economics, Springer;European Society for Population Economics, vol. 27(4), pages 1165-1186, October.
    12. Musayev, Vusal, 2014. "Commodity Price Shocks, Conflict and Growth: The Role of Institutional Quality and Political Violence," MPRA Paper 59786, University Library of Munich, Germany.
    13. Arshad Ali Bhatti & M. Emranul Haque & Denise R. Osborn, 2013. "Is the Growth Effect of Financial Development Conditional on Technological Innovation?," Centre for Growth and Business Cycle Research Discussion Paper Series 188, Economics, The University of Manchester.
    14. Asongu, Simplice A. & Nwachukwu, Jacinta C., 2016. "The Mobile Phone in the Diffusion of Knowledge for Institutional Quality in Sub-Saharan Africa," World Development, Elsevier, vol. 86(C), pages 133-147.
    15. Asongu, Simplice A. & Nwachukwu, Jacinta C. & Orim, Stella-Maris I., 2018. "Mobile phones, institutional quality and entrepreneurship in Sub-Saharan Africa," Technological Forecasting and Social Change, Elsevier, vol. 131(C), pages 183-203.
    16. Grundmann, Rainer & Gries, Thomas, 2015. "Crucial for Modern Sector Development? The Role of Exports and Institutions in Developing Countries," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112962, Verein für Socialpolitik / German Economic Association.
    17. Simplice A. Asongu & Jacinta C. Nwachukwu, 2019. "The role of openness in the effect of ICT on governance," Information Technology for Development, Taylor & Francis Journals, vol. 25(3), pages 503-531, July.
    18. Naddeo, Andreina, 2014. "How crime affects the economy: evidence from Italy," MPRA Paper 65419, University Library of Munich, Germany.
    19. Edwards, Jeffrey A. & Kasibhatla, Krishna, 2009. "Dynamic heterogeneity in cross-country growth relationships," Economic Modelling, Elsevier, vol. 26(2), pages 445-455, March.
    20. John Ssozi & Simplice A. Asongu, 2016. "The Comparative Economics of Catch-up in Output per Worker, Total Factor Productivity and Technological Gain in Sub-Saharan Africa," African Development Review, African Development Bank, vol. 28(2), pages 215-228, June.

    More about this item

    Keywords

    Military expenditure; Economic Growth; Contingency;
    All these keywords.

    JEL classification:

    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

    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:pra:mprapa:59783. See general information about how to correct material in RePEc.

    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: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.