Military Spending, Investment and Economic Growth in Small Industrialising Economies

Abstract

THE ECONOMIC EFFECTS OF MILITARY spending have been debated over a number of years. Since Benoit ( 1973) suggested that military expenditure had a positive impact on development, a large body of empirical literature has developed, looking at cross country studies and time series case studies of individual economies, without achieving any clear consensus. The results do suggest that military expenditure has a negative impact on growth in advanced economies through it being at the expense of investment, but there is no evidence of a significant effect for developing economies.

Does Defence Spending Impede Economic Growth? Cointegration and Causality Analysis for Pakistan

“…The seminal work of Benoit (1973Benoit ( , 1978 has spurred an increasing attention on the economic impact of defence spending with the relevant literature steadily expanding ever since (inter alia : Chowdhury, 1991;Dakurah et al, 2001;Sezgin, 2001;Atesoglu, 2002;Dunne et al, 2002;Abu-Bader and Abu-Qarm, 2003;Cuaresma and Reitschuler, 2004;Halicioglu, 2004;Bas, 2005;Yildirim et al, 2005;Kollias et al, 2007;Lee and Chen, 2007;Özsoy, 2008;Wijeweera and Webb, 2009). Broadly speaking, the findings are mixed and inconclusive with results depending on the country or sample of countries, the time period or the methodology used (for a survey of the findings and the issues see Dunne et al, 2005).…”

Military Expenditure, Economic Growth and Heterogeneity

“…However, since the end of the cold war, data quality and leverage has improved and the developments of panel data techniques has helped overcome limited exogenous variation in the data (Dunne, Nikolaidou, and Smith, 2002;Dunne, Smith, and Willenbockel, 2004). Panel data methods such as simple fixed effects, random effects and random coefficient estimators have been increasingly used and as longer time-series data becomes available dynamic specifications have been introduced into panel data methods .…”

Military Spending and Economic Growth: The Case of Iran

“…There are some studies which argue in support of the positive growth effects of military spending. In his seminal works, Benoit (1973Benoit ( , 1978 show The second group of studies point out the negative growth effects of military spending through different channels such as lower saving rates and investment, reduction of other productive spending (health and education), higher budget deficit, higher debt, increase of corruption, higher tax rates and lower productivity of private sector and lower capital formation and resource extraction (see, for example, Deger 1986;Chan 1988;Lebovic and Ishaq, 1987;Mintz and Huang, 1990;Scheetz, 1991;Asseery, 1996;Dunne and Vougas, 1999;Gupta et al, 2001;and Dunne et al, 2002). Chowdhury (1991) examines the Granger causality between military spending and economic growth for the 55 developing countries.…”