Defense spending, technological change, and economic growth in the United States

Abstract

A two sector neo-classical growth model of the economy composed of a civilian and a defense sector with technological change in both sectors and with defense acting as an externality in the civilian sector is presented. The inclusion of technological change separates the effect of defense spending into two components, the change in the rate of defense spending and the relative size of the defense sector. Estimation shows that a change in defense spending has a positive and significant effect on the growth rate of the economy and that both defense effects are individually significant.

Relationship between Military Expenditure and Economic Growth in ASEAN: Evidence from Indonesia

“…Pivetti (1992) and Cypher (1987) suggest that military spending is a conscious instrument of economic policy and has a stimulating effect on economy. Mueller and Atesoglu (1993), in their empirical analysis quoted in Heo (2010), also find that defense spending stimulates the U.S. economy.…”

Survey and Review of the Defense Economics Literature on Greece and Turkey: What Have We Learned?

“…They include Alexander (1990) for 9 developed countries 1974-1985; Atesoglu and Mueller (1990) for the US 1949US -1989Huang and Mintz (1990) for the US 1952US -1988Huang and Mintz (1991) for the US 1952US -1988Ward et al (1991) on India 1950-1987Ward and Davis (1992) 1948Mueller and Atesoglu (1993) for the US 1948, Alexander (1995 1966-1988Ward, Davis, and Lofdahl (1995) for the US 1889-1991 and Japan 1879-1990; Antonakis (1997b) for Greece 1958Greece -1991and Herrera (1998) for Pakistan 1960Pakistan -1993; and a review by Ram (1995).…”

An empirical study of the spin-off effects of military spending

“…3 Despite mostly insignificant results for both hypotheses, Biswas and Ram (1986) motivated other sectoral studies that decompose the economy into two or more sectors including the military, the non-military government sector, the export sector and the domestic private sector. The results from these studies, like those discussed above, also differ considerably depending on sample, study period and assumptions about the interactions among sectors (Alexander, 1990(Alexander, , 1995Atesoglu and Mueller, 1990;Heo, 1998;Huang and Mintz, 1991;Mintz and Stevenson, 1994;Mueller and Atesoglu, 1993). 4 An exhaustive search of the literature indicates that only one study has analysed the industrylevel impact of the spin-offs associated with military spending.…”