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Military Spending and Economic Growth

Author

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  • Luca Pieroni

    (University of Perugia and University of the West of England)

Abstract

This paper proposes to test 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 nonlinear effect of military expenditure on economic growth. The comparison between costs and benefits of defence sector has traditionally explained the nonlinear relationship. This paper suggests that shocks to insecurity may also be a source of nonlinearity 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 nonparametric 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, 2007. "Military Spending and Economic Growth," Working Papers 0708, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    • Handle: RePEc:uwe:wpaper:0708
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    References listed on IDEAS

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    12. Jesús Crespo Cuaresma & Gerhard Reitschuler, 2006. "‘Guns Or Butter?’ Revisited: Robustness And Nonlinearity Issues In The Defense–Growth Nexus," Scottish Journal of Political Economy, Scottish Economic Society, vol. 53(4), pages 523-541, September.
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    Cited by:

    1. Neila Ben Afia and Sana Harbi, 2017. "Empirical Analysis of the Relationship between Military Endeavor, Economic Growth and Happiness," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 42(2), pages 51-66, June.
    2. Pierluigi Daddi & Giorgio d’Agostino & Luca Pieroni, 2018. "Does military spending stimulate growth? An empirical investigation in Italy," Defence and Peace Economics, Taylor & Francis Journals, vol. 29(4), pages 440-458, June.
    3. 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.
    4. d'Agostino, G. & Dunne, J.P. & Pieroni, L., 2011. "Optimal military spending in the US: A time series analysis," Economic Modelling, Elsevier, vol. 28(3), pages 1068-1077, May.
    5. 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.
    6. repec:ldr:wpaper:95 is not listed on IDEAS
    7. Pieroni Luca & d'Agostino Giorgio, 2009. "Military Spending, Corruption and Economic Growth," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 14(3), pages 1-14, March.

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    More about this item

    Keywords

    Economic growth; military burden; cross-section estimations;
    All these keywords.

    JEL classification:

    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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