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Models of Military Expenditure and Growth: A Critical Review

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Author Info
J Paul Dunne () (School of Economics, University of the West of England)
Ron Smith (Birkbeck College)
Dirk Willenbockel (Middlesex University Business School)

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Abstract

This paper reviews some of the theoretical and econometric issues involved in estimating growth models that include military spending. While the mainstream growth literature has not found military expenditure to be a significant determinant of growth, much of the defence economics literature has found significant effects. The paper argues that this is largely the product of the particular specification, the Feder- Ram model, that has been used in the defence economics literature but not in the mainstream literature. The paper critically evaluates this model, detailing its problems and limitations and suggests that it should be avoided. It also critically evaluates two alternative theoretical approaches, the Augmented Solow and the Barro models, suggesting that they provide a more promising avenue for future research. It concludes with some general comments about modelling the links between military expenditure and growth.

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File URL: http://carecon.org.uk/DPs/0408.pdf
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Publisher Info
Paper provided by University of the West of England, Department of Economics in its series Discussion Papers with number 0408.

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Length: 19 pages
Date of creation: Dec 2004
Date of revision:
Handle: RePEc:uwe:wpaper:0408

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Web page: http://www.uwe.ac.uk/bbs/acad/econ/econ.shtml
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Related research
Keywords: Military expenditure; models; growth;

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This paper has been announced in the following NEP Reports: 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.:
  1. Jesús Crespo Cuaresma & Gerhard Reitschuler, 2004. "A non-linear defence-growth nexus? evidence from the US economy," Defence and Peace Economics, Taylor and Francis Journals, vol. 15(1), pages 71-82, February. [Downloadable!] (restricted)
  2. William R. Hauk & Romain Wacziarg, 2004. "A Monte Carlo Study of Growth Regressions," NBER Technical Working Papers 0296, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Gong, Liutang & Zou, Heng-fu, 2003. "Military spending and stochastic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 28(1), pages 153-170, October. [Downloadable!] (restricted)
  4. Bleaney, Michael & Nishiyama, Akira, 2002. " Explaining Growth: A Contest between Models," Journal of Economic Growth, Springer, vol. 7(1), pages 43-56, March. [Downloadable!] (restricted)
  5. 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. [Downloadable!]
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  6. Biswas, Basudeb & Ram, Rati, 1986. "Military Expenditures and Economic Growth in Less Developed Countries: An Augmented Model and Further Evidence," Economic Development and Cultural Change, University of Chicago Press, vol. 34(2), pages 361-72, January.
  7. Antonakis, Nicholas, 1997. "Defence Spending and Growth in Greece: A Comment and Further Empirical Evidence," Applied Economics Letters, Taylor and Francis Journals, vol. 4(10), pages 651-55, October. [Downloadable!] (restricted)
  8. Jurgen Brauer, 2002. "Survey and Review of the Defense Economics Literature on Greece and Turkey: What Have We Learned?," Defence and Peace Economics, Taylor and Francis Journals, vol. 13(2), pages 85-107, January. [Downloadable!] (restricted)
  9. Feder, Gershon, 1983. "On exports and economic growth," Journal of Development Economics, Elsevier, vol. 12(1-2), pages 59-73. [Downloadable!] (restricted)
  10. 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. [Downloadable!] (restricted)
  11. Joshua Aizenman & Reuven Glick, 2006. "Military expenditure, threats, and growth," Journal of International Trade & Economic Development, Taylor and Francis Journals, vol. 15(2), pages 129-155, June. [Downloadable!] (restricted)
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  12. 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. [Downloadable!] (restricted)
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  13. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May. [Downloadable!] (restricted)
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  14. Deger, Saadet & Sen, Somnath, 1995. "Military expenditure and developing countries," Handbook of Defense Economics, in: Keith Hartley & Todd Sandler (ed.), Handbook of Defense Economics, edition 1, volume 1, chapter 11, pages 275-307 Elsevier. [Downloadable!] (restricted)
  15. Brumm, Harold J., 1997. "Military Spending, Government Disarray, and Economic Growth: A Cross-Country Empirical Analysis," Journal of Macroeconomics, Elsevier, vol. 19(4), pages 827-838, October. [Downloadable!] (restricted)
  16. Gernot Doppelhofer & Ronald I. Miller & Xavier Sala-i-Martin, 2000. "Determinants of Long-Term Growth: A Bayesian Averaging of Classical Estimates (BACE) Approach," NBER Working Papers 7750, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, 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.)

  1. Paul Dunne & Eftychia Nikolaidou, 2005. "Military Spending and Economic Growth in Greece, Portugal and Spain," Discussion Papers 0510, University of the West of England, Department of Economics. [Downloadable!]
    Other versions:
  2. Katarina Keller & Panu Poutvaara & Andreas Wagener, 2006. "Military Draft and Economic Growth in OECD Countries," IZA Discussion Papers 2022, Institute for the Study of Labor (IZA). [Downloadable!]
  3. Stergios Skaperdas, 2009. "The Costs of Organized Violence: A Review of the Evidence," Working Papers 080924, University of California-Irvine, Department of Economics. [Downloadable!]
    Other versions:
  4. Kalyoncu, Huseyin & Yucel, Fatih, 2005. "An analytical approach on defense expenditure and economic growth: the case of Turkey and Greece," MPRA Paper 4262, University Library of Munich, Germany, revised 2006. [Downloadable!]
    Other versions:
  5. Paresh Kumar Narayan & Russell Smyth, 2007. "The Military Expenditure-External Debt Nexus: New Evidence From A Panel Of Middle Eastern Countries," Monash Economics Working Papers 17/07, Monash University, Department of Economics. [Downloadable!]
  6. Giorgio d'Agostino & Luca Pieroni & J Paul Dunne, 2009. "Optimal Military Spending in the US: A Time Series Analysis," Discussion Papers 0903, University of the West of England, Department of Economics. [Downloadable!]
  7. Poutvaara, Panu & Wagener, Andreas, 2009. "The Political Economy of Conscription," IZA Discussion Papers 4429, Institute for the Study of Labor (IZA). [Downloadable!]
  8. Baddeley, M.C., 2008. "Poverty, Armed Conflict and Financial Instability," Cambridge Working Papers in Economics 0857, Faculty of Economics, University of Cambridge. [Downloadable!]
  9. Luca Pieroni, 2007. "How Strong is the Relationship between Defence Expenditure and Private Consumption? Evidence from the United States," Discussion Papers 0705, University of the West of England, Department of Economics. [Downloadable!]
  10. Luca Pieroni & Giorgio d'Agostino & Marco Lorusso, 2008. "Can We Declare Military Keynesianism Dead?," Discussion Papers 0804, University of the West of England, Department of Economics. [Downloadable!]
  11. Paul Dunne & Duncan Watson, 2005. "Manufacturing Growth, Technological Progress, and Military Expenditure," Discussion Papers 0511, University of the West of England, Department of Economics. [Downloadable!]
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