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"Guns or Butter?" Revisited: Robustness and Nonlinearity Issues in the Defense-Grotwth Nexus

The relationship between military expenditure and growth is studied taking into account potential nonlinearities and robustness issues in the specification of the econometric models used. Using cross-country growth regressions and the widely used Feder-Ram model, the partial correlation between defense and economic growth appears robust and significantly negative only for countries with a relatively low military expenditure ratio. While the externality effect appears positive in this subgroup of countries, the overall effect turns negative due to the size effect of the military sector.

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File URL: http://homepage.univie.ac.at/Papers.Econ/RePEc/vie/viennp/vie0310.pdf
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Paper provided by University of Vienna, Department of Economics in its series Vienna Economics Papers with number 0310.

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Date of creation: Aug 2003
Handle: RePEc:vie:viennp:0310
Contact details of provider: Web page: http://www.univie.ac.at/vwl

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