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How Spending on Defense versus Human Capital impacts Economic Productivityin South Asia?

Muhammad Zeshan () and Vaqar Ahmed ()
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Muhammad Zeshan: Sustainable Development Policy Institute, Pakistan

International Journal of Economics and Empirical Research (IJEER), 2014, vol. 2, issue 2, 74-83

Abstract: South Asiahosts the highest number of poor people yet it continues to attach priority to its defence spendings. The present study investigates the relationship between defence spendings, health care expenditures, research, and economic growth of 5 South Asian countries including Bangladesh, India, Nepal, Pakistan, and Sri Lanka. The empirical results are based on the panel unit root tests, fixed and random effect models while the Hausman test has been used for the diagnostic analysis for the period 1994-2010. The short-run results indicate that a 1% increase in health care expenditures and research input boost economic growth by 1.43% and 1.17% respectively. The long-run results indicate that defence spending is not contributing to economic growth whereas health care expenditures and research contribute 3.62% and 2.28% in long-run productivity. Hence, the present study suggests the South Asian government to focus more on health care and research activities which have higher social returns.

Keywords: South Asia; Defence Spending; Health Care; Research; Economic Growth (search for similar items in EconPapers)
JEL-codes: N1 O3 P3 R5 (search for similar items in EconPapers)
Date: 2014
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International Journal of Economics and Empirical Research (IJEER) is currently edited by Dr. Muhammad Shahbaz (PhD Applied Economics)

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