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While the relationship between military expenditure and economic growth during the Cold War period is well-researched, relatively less is known on the issue for the…
While the relationship between military expenditure and economic growth during the Cold War period is well-researched, relatively less is known on the issue for the post-Cold War era. Equally how the relationship varies with respect to exposure to conflict is also not fully examined. Therefore, the purpose of this paper is to investigate the causal impact of military expenditure on growth in the presence of internal and external threats for the period 1990-2013 using data from 70 developing countries.
The main estimates are based on the generalized method of moments (GMM) regression model. But for comparison purposes, the authors also report estimates using fixed and random effects as well as pooled cross-section regressions. The regression specification accounts for non-linear effect of military expenditure allowing for interaction with conflict variable (where distinction is made between external and internal conflict).
The analysis indicates that methods as well as model specification matter in studying the effect of military spending on growth. Full sample estimates based on GMM, fixed, and random effects models suggest a negative and statistically significant effect of military expenditure. However, fixed effects estimate becomes insignificant for low-income countries. The effect of military spending is also insignificant in the cross-sectional OLS model if conflict is not considered. When the regression model additionally controls for conflict, the effect of military spending conditional upon (internal) conflict exposure is significant and positive. No such effect is present conditional upon external threat.
One important limitation of the analysis is the small sample size – the authors had to restrict analysis to 70 low and middle-income countries for which the authors could construct post-Cold War panel data on military expenditure along with information on armed conflict exposure (the later from the Uppsala Conflict Data Program, 2015).
To the best of the author’s knowledge, this is the first paper to examine the joint impact of military expenditure and conflict on economic growth in post-Cold War period in a sample of developing countries. Moreover, an attempt is made to review and revisit the large Cold War literature where studies vary considerably in terms findings. A key reason for this is the somewhat ad hoc choice of econometric methods – most rely on cross-section data and rarely conduct sensitivity analysis. The authors instead rely on panel data estimates but also report results based on naïve models for comparison purposes.
This article examines the relation between measures of military affairs (such as its budgetary cost and the size of armed forces) and measures of human development (such…
This article examines the relation between measures of military affairs (such as its budgetary cost and the size of armed forces) and measures of human development (such as education, health, freedom, and income). The article's major innovation concerns the separation of data by groups of countries. Across a variety of statistical specifications, I find that the statistical relation between military and human development variables is inconclusive, except for the case of the industrialized nations where a clear negative relation emerges. A discussion of the findings, aimed at the public policy-maker, concludes the article.
Shortcomings of Argentina's defence policy.
This article begins with a discussion of the various costs which occur as a result of armed conflict. It then examines the alternative ways in which wars can be financed. Sri Lanka's military expenditure increased six fold, in real terms, between 1981 and 1991. This increase appears to have been financed principally from a reduction in capital expenditures and by a diversion of expenditures away from Economic Affairs and Services, and within this category, especially agriculture. The implications for economic growth are examined. It is estimated that the conflict is resulting in a reduction in the rate of growth of GDP by half a percent per annum.