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Defence Spending and Economic Growth in the EU15

Author

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  • J Paul Dunne

    (University of the West of England and University of Cape Town)

  • Eftychia Nikolaidou

    (CITY College, Thessaloniki, Greece)

Abstract

Over the last 30 years there has been an impressive amount of empirical work on the defence-growth nexus, using different methodologies, models and econometric techniques and focusing on individual case studies, cross-country studies or panel data studies. Despite the number and the variety of studies, the evidence on the defence-growth relationship is still far from conclusive. Rather surprisingly, very limited work has been published in the relevant literature for the European Union despite the continuous discussions for a Common European Defence Policy that would require an assessment of the economic effects of defence in this region. To fill in the gap in the literature, this paper employs an augmented Solow-Swan model and estimates it both with panel and time series methods to provide empirical evidence on the economic effects of defence spending in the EU15 over the period 1961-2007. Overall, evidence derived from both panel and time series methods is consistent and suggests that military burden does not promote economic growth in this region.

Suggested Citation

  • J Paul Dunne & Eftychia Nikolaidou, 2011. "Defence Spending and Economic Growth in the EU15," Working Papers 1102, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    • Handle: RePEc:uwe:wpaper:1102
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    References listed on IDEAS

    as
    1. J. Paul Dunne & Ron Smith, 2010. "Military Expenditure And Granger Causality: A Critical Review," Defence and Peace Economics, Taylor & Francis Journals, vol. 21(5-6), pages 427-441.
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    4. Malcolm Knight & Norman Loayza & Delano Villanueva, 1996. "The Peace Dividend: Military Spending Cuts and Economic Growth," IMF Staff Papers, Palgrave Macmillan, vol. 43(1), pages 1-37, March.
    5. Dimitris Hatzinikolaou, 2007. "A Panel Data Analysis Of The Nexus Between Defence Spending And Growth In The European Union: A Comment," Defence and Peace Economics, Taylor & Francis Journals, vol. 18(6), pages 577-579.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Defence Spending; Economic Growth; Panel data; time series; EU15;
    All these keywords.

    JEL classification:

    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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