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Guns for Butter? Empirical Evidence from China

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  • Yingying Xu
  • Hsu Ling Chang
  • Chi Wei Su
  • Adelina Dumitrescu

Abstract

This study examines the causal nexus between defence spending and education expenditure in China using the bootstrap Granger full-sample causality test and sub-sample rolling window estimation. The full-sample result indicates that there is no causality between defence spending and education expenditure. By adopting a time-varying rolling window approach to revisit the dynamic causal relationships, this article identifies a negative unidirectional causality running from education expenditure to defence spending. The finding suggests that it is the education expenditure crowds out defence spending in China rather than reverse. No causality is demonstrated from defence spending to education expenditure, indicating that an increase in military spending will not crowd out expenditure on education. The results could be partly explained by that the education expenditure in China is below the requirement of corresponding economic growth, urging for more financial budget. Whereas the findings support a negative trade-off between defence and education expenditures, they refute the theory of ‘guns for butter’.

Suggested Citation

  • Yingying Xu & Hsu Ling Chang & Chi Wei Su & Adelina Dumitrescu, 2018. "Guns for Butter? Empirical Evidence from China," Defence and Peace Economics, Taylor & Francis Journals, vol. 29(7), pages 809-820, November.
    • Handle: RePEc:taf:defpea:v:29:y:2018:i:7:p:809-820
    DOI: 10.1080/10242694.2017.1293791
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    References listed on IDEAS

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    1. 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.
    2. Eric S. Lin & Hamid E. Ali, 2009. "Military Spending and Inequality: Panel Granger Causality Test," Journal of Peace Research, Peace Research Institute Oslo, vol. 46(5), pages 671-685, September.
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    Cited by:

    1. MAÏ ASSAN CHEDI, Maman, 2022. "Does Defence Expenditure Affect Education and Health expenditures in Saharan Africa?," African Journal of Economic Review, African Journal of Economic Review, vol. 10(4), September.
    2. Xiaoxiao Li & Wei Niu, 2020. "Support potential of elite civil universities for China’s space industry: Higher educational mobilization capacity for China’s space ambition," PLOS ONE, Public Library of Science, vol. 15(12), pages 1-21, December.

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