Military expenditure, threats, and growth

Joshua Aizenman, Reuven Glick

Research output: Contribution to journalArticlepeer-review

93 Scopus citations

Abstract

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.

Original languageEnglish
Pages (from-to)129-155
Number of pages27
JournalJournal of International Trade and Economic Development
Volume15
Issue number2
DOIs
StatePublished - 1 Jun 2006
Externally publishedYes

Keywords

  • Corruption
  • Economic growth
  • External threats
  • Military expenditure

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