TY - JOUR
T1 - Military expenditure, threats, and growth
AU - Aizenman, Joshua
AU - Glick, Reuven
N1 - Funding Information:
We thank Marc Meredith and Ann Lucas for research assistance. The views presented in this paper are those of the authors alone and do not necessarily reflect those of the NBER, the Federal Reserve Bank of San Francisco, or the Board of Governors of the Federal Reserve System. This research was supported by faculty research funds granted by the University of California, Santa Cruz. Useful comments by two anonymous referees are gratefully acknowledged. Any errors are the authors’ own.
PY - 2006/6/1
Y1 - 2006/6/1
N2 - This paper clarifies one of the puzzling results of the economic growth literature: the impact of military expenditure is frequently found to be non-significant or negative, yet most countries spend a large fraction of their GDP on defense and the military. We start by empirical evaluation of the non-linear interactions between military expenditure, external threats, corruption, and other relevant controls. While growth falls with higher levels of military spending, given the values of the other independent variables, we show that military expenditure in the presence of threats increases growth. We explain the presence of these non-linearities in an extended version of Barro and Sala-i-Martin (1995), allowing the dependence of growth on the severity of external threats, and on the effective military expenditure associated with these threats.
AB - This paper clarifies one of the puzzling results of the economic growth literature: the impact of military expenditure is frequently found to be non-significant or negative, yet most countries spend a large fraction of their GDP on defense and the military. We start by empirical evaluation of the non-linear interactions between military expenditure, external threats, corruption, and other relevant controls. While growth falls with higher levels of military spending, given the values of the other independent variables, we show that military expenditure in the presence of threats increases growth. We explain the presence of these non-linearities in an extended version of Barro and Sala-i-Martin (1995), allowing the dependence of growth on the severity of external threats, and on the effective military expenditure associated with these threats.
KW - Corruption
KW - Economic growth
KW - External threats
KW - Military expenditure
UR - http://www.scopus.com/inward/record.url?scp=33745384245&partnerID=8YFLogxK
U2 - 10.1080/09638190600689095
DO - 10.1080/09638190600689095
M3 - Article
AN - SCOPUS:33745384245
SN - 0963-8199
VL - 15
SP - 129
EP - 155
JO - Journal of International Trade and Economic Development
JF - Journal of International Trade and Economic Development
IS - 2
ER -
