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National and Regional Economic Consequences of Swiss Defense Spending

Author

Listed:
  • Thomas Bernauer

    (Center for Comparative and International Studies, ETH Zurich)

  • Vally Koubi

    (Department of Economics and Oeschger Center, University of Bern; and Center for Comparative and International Studies, ETH Zurich, vally.koubi@vwi.unibe.ch)

  • Fabio Ernst

    (Swiss Armed Forces Planning Staff)

Abstract

The effects of defense spending on economic performance and, in particular, on economic growth have been studied extensively in the literature. The empirical findings have been ambiguous so far, partly reflecting the econometric difficulties involved in the estimation of this relationship. The authors study the implications of Swiss defense spending for economic growth and unemployment in Switzerland, using both national aggregate and cross-sectional (cantonal) data. Such analysis may be more informative than similar analyses that rely on time series for individual countries (due to spurious time effects) or averages for different countries (due to strong cross country variation in country characteristics). The findings indicate that although defense spending has had a positive effect on the rate of economic growth of Switzerland in the presence of an external threat (Cold War), the distribution of defense spending across cantons has not contributed to the dispersion of cantonal growth rates. Nonetheless, cantons in which military employment is a large share of total employment have enjoyed lower and more stable unemployment rates. These findings suggest that in order to uncover the full implications of defense spending, it is necessary to go beyond the defense spending—growth nexus. The findings seem relevant for many other countries because the allocation of national defense employment and spending is rarely uniform across the regions of any country.

Suggested Citation

  • Thomas Bernauer & Vally Koubi & Fabio Ernst, 2009. "National and Regional Economic Consequences of Swiss Defense Spending," Journal of Peace Research, Peace Research Institute Oslo, vol. 46(4), pages 467-484, July.
  • Handle: RePEc:sae:joupea:v:46:y:2009:i:4:p:467-484
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    References listed on IDEAS

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    1. James Murdoch & Chung-Ron Pi & Todd Sandler, 1997. "The impact of defense and non-defense public spending on growth in Asia and Latin America," Defence and Peace Economics, Taylor & Francis Journals, vol. 8(2), pages 205-224.
    2. Helmut Maneval & Pasi Rautsola & Rolf Wiegert, 1991. "Military Spending and Economic Growth: A Comment on Cappelen, Gleditsch and Bjerkholt," Journal of Peace Research, Peace Research Institute Oslo, vol. 28(4), pages 425-430, November.
    3. Ward, Michael D. & Davis, David R., 1992. "Sizing up the Peace Dividend: Economic Growth and Military Spending in the United States, 1948–1996," American Political Science Review, Cambridge University Press, vol. 86(3), pages 748-755, September.
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    Cited by:

    1. Josselin Droff & Alfredo R. Paloyo, 2015. "Assessing The Regional Economic Impacts Of Defense Activities: A Survey Of Methods," Journal of Economic Surveys, Wiley Blackwell, vol. 29(2), pages 375-402, April.
    2. Gangopadhyay Partha & Elkanj Nasser, 2009. "Politics of Defence Spending and Endogenous Inequality," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 15(1), pages 27-49, May.
    3. Oana Ramona GLONT, 2018. "The Effect Of Defence Spending On Economic Development In Central Europe," SEA - Practical Application of Science, Romanian Foundation for Business Intelligence, Editorial Department, issue 16, pages 97-106, May.
    4. 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.
    5. Sakiru Solarin, 2016. "Sources of labour productivity: a panel investigation of the role of military expenditure," Quality & Quantity: International Journal of Methodology, Springer, vol. 50(2), pages 849-865, March.
    6. Rosella Cappella Zielinski & Benjamin O Fordham & Kaija E Schilde, 2017. "What goes up, must come down? The asymmetric effects of economic growth and international threat on military spending," Journal of Peace Research, Peace Research Institute Oslo, vol. 54(6), pages 791-805, November.

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