The impact of defense expenditure on economic productivity in OECD countries

Tung-Pao Wang, Stacy Huey-Pyng Shyu and Han-Chung Chou

Economic Modelling, 2012, vol. 29, issue 6, 2104-2114

Abstract: Evaluating the effects of defense spending on macroeconomic performance and, in particular, on economic productivity is a critical issue. This study integrates Malmquist productivity index (MPI) with bootstrapping to establish statistical inferences that provide a complete, effective analysis of the impact of defense expenditure on economic productivity between 1993 and 2009 for Economic Co-operation and Development member countries. The findings indicate that the average MPI with defense expenditure is higher than that without defense expenditure. Additionally, region based productivity analysis indicates that the appropriate allocation of defense expenditure can increase regional economic productivity effectively across Asia, Oceania and Europe. Moreover, the results further prove that the effective defense expenditure strategies undertaken by government are important for improving economic productivity of countries. The integrated methodology approach applied in this study can be used for further similar studies.

Keywords: Defense expenditure strategy; Economic productivity; Productivity index; Bootstrap; OECD (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:29:y:2012:i:6:p:2104-2114

DOI: 10.1016/j.econmod.2012.06.041

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