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How Spending on Defense versus Human Capital impacts Economic Productivityin South Asia?

Author

Listed:
  • Muhammad Zeshan

    (Sustainable Development Policy Institute, Pakistan)

  • Vaqar Ahmed

    (Sustainable Development Policy Institute, Pakistan)

Abstract

South Asiahosts the highest number of poor people yet it continues to attach priority to its defence spendings. The present study investigates the relationship between defence spendings, health care expenditures, research, and economic growth of 5 South Asian countries including Bangladesh, India, Nepal, Pakistan, and Sri Lanka. The empirical results are based on the panel unit root tests, fixed and random effect models while the Hausman test has been used for the diagnostic analysis for the period 1994-2010. The short-run results indicate that a 1% increase in health care expenditures and research input boost economic growth by 1.43% and 1.17% respectively. The long-run results indicate that defence spending is not contributing to economic growth whereas health care expenditures and research contribute 3.62% and 2.28% in long-run productivity. Hence, the present study suggests the South Asian government to focus more on health care and research activities which have higher social returns.

Suggested Citation

  • Muhammad Zeshan & Vaqar Ahmed, 2014. "How Spending on Defense versus Human Capital impacts Economic Productivityin South Asia?," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 2(2), pages 74-83, February.
    • Handle: RePEc:ijr:journl:v:2:y:2014:i:2:p:74-83
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    Citations

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    Cited by:

    1. Syed Shujaat AHMED & Asif JAVED, 2017. "The Effect of Public Sector Development Expenditures and Investment on Economic Growth: Evidence from Pakistan," Journal of Economics and Political Economy, KSP Journals, vol. 4(2), pages 203-214, June.
    2. Saba Ismail, 2017. "Military Expenditure and Economic Growth in South Asian Countries: Empirical Evidences," International Journal of Economics and Financial Issues, Econjournals, vol. 7(3), pages 318-325.

    More about this item

    Keywords

    South Asia; Defence Spending; Health Care; Research; Economic Growth;
    All these keywords.

    JEL classification:

    • N1 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • P3 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions
    • R5 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis

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