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The impact of defense expenditure on economic productivity in OECD countries

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  • Wang, Tung-Pao
  • Shyu, Stacy Huey-Pyng
  • Chou, Han-Chung

Abstract

Evaluating the effects of defense spending on macroeconomic performance and, in particular, on economic productivity is a critical issue. This study integrates Malmquist productivity index (MPI) with bootstrapping to establish statistical inferences that provide a complete, effective analysis of the impact of defense expenditure on economic productivity between 1993 and 2009 for Economic Co-operation and Development member countries. The findings indicate that the average MPI with defense expenditure is higher than that without defense expenditure. Additionally, region based productivity analysis indicates that the appropriate allocation of defense expenditure can increase regional economic productivity effectively across Asia, Oceania and Europe. Moreover, the results further prove that the effective defense expenditure strategies undertaken by government are important for improving economic productivity of countries. The integrated methodology approach applied in this study can be used for further similar studies.

Suggested Citation

  • Wang, Tung-Pao & Shyu, Stacy Huey-Pyng & Chou, Han-Chung, 2012. "The impact of defense expenditure on economic productivity in OECD countries," Economic Modelling, Elsevier, vol. 29(6), pages 2104-2114.
    • Handle: RePEc:eee:ecmode:v:29:y:2012:i:6:p:2104-2114
    DOI: 10.1016/j.econmod.2012.06.041
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    8. José R. García & Joaquín Murillo & Jordi Suriñach & Esther Vayá, 2018. "Economic impact of the ministry of defence’s budget: methodological design and results for the Spanish economy," Defence and Peace Economics, Taylor & Francis Journals, vol. 29(4), pages 459-473, June.
    9. Guo Ping & Alotaish Mohammed Saud M., 2017. "Revisiting the Causal Nexus between Defense Expenditure and Economic Growth: Time Series Analysis for Saudi Arabia," Asian Journal of Economic Modelling, Asian Economic and Social Society, vol. 5(1), pages 35-43, March.
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    17. Liming Zhao & Liang Zhao & Bing-Fu Chen, 2017. "The interrelationship between defence spending, public expenditures and economic growth: evidence from China," Defence and Peace Economics, Taylor & Francis Journals, vol. 28(6), pages 703-718, November.

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