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Defense Spending and Economic Growth in Subsaharan Africa: An Econometric Investigation

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  • Kwabena Gyimah-Brempong

    (Department of Economics, Wright State University)

Abstract

A four equation - growth rate, defense burden, skilled labor rate, and investment rate - simultaneous model is used to investigate whether increased defense burden increases or decreases economic growth and the channels through which defense burden influences economic growth in Less Developed Countries (LDCs). The model is estimated using cross national data for 39 Subsaharan African countries during the 1973 to 1983 period from ACDA data sources. The estimation procedure is three stage least squares. Defense burden affects economic growth directly through increased demand, technological spin-off, and modernization of attitudes and indirectly through increased supply of skilled labor and decreased investment. The positive effects defense burden has on growth are swamped by the negative effect it has on growth rate through decreased investment. We calculate a defense burden/growth rate multiplier of -0.12. When we re-estimate the model using SIPRI data sources, the qualitative results remain unchanged. The implication of this result is that African countries cannot use increased defense spending to stimulate economic growth because there is a trade-off between high defense burden and economic growth.

Suggested Citation

  • Kwabena Gyimah-Brempong, 1989. "Defense Spending and Economic Growth in Subsaharan Africa: An Econometric Investigation," Journal of Peace Research, Peace Research Institute Oslo, vol. 26(1), pages 79-90, February.
    • Handle: RePEc:sae:joupea:v:26:y:1989:i:1:p:79-90
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    Cited by:

    1. Saba Charles Shaaba, 2022. "Defence Spending and Economic Growth in South Africa: Evidence from Cointegration and Co-Feature Analysis," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 28(1), pages 51-100, February.
    2. Collier, Paul & Hoeffler, Anke, 2002. "Military expenditure - threats, aid, and arms races," Policy Research Working Paper Series 2927, The World Bank.
    3. Peter Nijkamp & Jacques Poot, Victoria, 2002. "Meta-Analysis of the Impact of Fiscal Policies on Long-Run Growth," Tinbergen Institute Discussion Papers 02-028/3, Tinbergen Institute, revised 23 Apr 2003.
    4. Sefa Awaworyi Churchill & Siew Ling Yew, 2018. "The effect of military expenditure on growth: an empirical synthesis," Empirical Economics, Springer, vol. 55(3), pages 1357-1387, November.
    5. 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.
    6. Serif Canbay & Mustafa Kırca & Erkan Oflaz, 2021. "Relationships Between Defence Expenditures and Economic Growth in G7 Countries Panel Bootstrap Causality Analysis," Bingol University Journal of Economics and Administrative Sciences, Bingol University, Faculty of Economics and Administrative Sciences, vol. 5(1), pages 119-140, August.
    7. Khalid Zaman, 2019. "Does higher military spending affect business regulatory and growth specific measures? Evidence from the group of seven (G-7) countries," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 36(1), pages 323-348, April.
    8. Charles Shaaba Saba & Nicholas Ngepah, 2022. "Nexus between defence spending, economic growth and development: evidence from a disaggregated panel data analysis," Economic Change and Restructuring, Springer, vol. 55(1), pages 109-151, February.
    9. Aynur Alptekin & Paul Levine, 2009. "Military Expenditure and Economic Growth Literature: A Meta-Analysis," School of Economics Discussion Papers 0209, School of Economics, University of Surrey.
    10. Ibrahim Ahmed Elbadawi & Philip Keefer, 2014. "Democracy, Democratic Consolidation and Military Spending," Working Papers 848, Economic Research Forum, revised Oct 2014.
    11. Garfinkel, Michelle R. & Skaperdas, Stergios (ed.), 2012. "The Oxford Handbook of the Economics of Peace and Conflict," OUP Catalogue, Oxford University Press, number 9780195392777.
    12. W. Robert Reed & Nurul Sidek, 2013. "A Replication of "Meta-Analysis of the Effect of Fiscal Policies on Long-Run Growth" (European Journal of Political Economy, 2004)," Working Papers in Economics 13/33, University of Canterbury, Department of Economics and Finance.
    13. Innocent.U. Duru & Millicent Adanne Eze & Bartholomew.O.N. Okafor & Abubakar Yusuf & Lawrence.O. Ede & Abubakar Sadiq Saleh, 2021. "Military Outlay and Economic Growth: The Scenarios of Lake Chad Basin Countries of the Republic of Chad and Nigeria," Growth, Asian Online Journal Publishing Group, vol. 8(1), pages 12-26.

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