Military Expenditure, Threats, and Growth

Joshua Aizenman and Reuven Glick

Santa Cruz Department of Economics, Working Paper Series from Department of Economics, UC Santa Cruz

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.

Keywords: Economic growth; military expenditure; external threats; corruption (search for similar items in EconPapers)
Date: 2003-09-01
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Citations: View citations in EconPapers (34)

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Related works:
Journal Article: Military expenditure, threats, and growth (2006)
Working Paper: Military Expenditure, Threats, and Growth (2003)
Working Paper: Military expenditure, threats, and growth (2003)
Working Paper: Military Expenditure, Threats, and Growth (2003)
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