Abstract. This paper attempts to analyse the interrelationships between government and military expenditure and economic growth in particular, and between security and development in general, in a new framework. It has three novel features. First, the impact of military spending (as well as any other government spending which has similar externalities) is studied in an endogenous growth framework unlike most of the previous research in the field. Second, growth, welfare and security effects are studied simultaneously. Third, simulation studies are made for specific countries to capture long-term steady state effects which are difficult to analyze in longitudinal case studies.
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