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The peace dividend: military spending cuts and economic growth

Malcolm Knight, Norman Loayza () and Delano Villanueva ()

No 1577, Policy Research Working Paper Series from The World Bank

Abstract: Conventional wisdom suggests that reducing military spending may improve a country's economic growth, but empirical studies have produced ambiguous results on this point. Extending a standard growth model, the authors exploit both cross-section and time-series dimensions of available data to get consistent estimates of the growth-retarding effects of military spending. Military spending is growth-retarding because of its adverse impact on capital formation and resourceallocation. Model simulation results suggest a substantial long-term peace dividend - in the form of higher capacity output per capita - that may result from: 1) markedly lower military spending in most regions in the late 1980s; and 2) future cuts in military spending if global peace is secured.

Keywords: Legal Products; Peace&Peacekeeping; Economic Theory&Research; Environmental Economics&Policies; Decentralization; Peace&Peacekeeping; Achieving Shared Growth; Inequality; Economic Theory&Research; Legal Products (search for similar items in EconPapers)
Date: 1996-02-29
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Journal Article: The Peace Dividend: Military Spending Cuts and Economic Growth (1996) Downloads
Working Paper: The Peace Dividend; Military Spending Cuts and Economic Growth (1995) Downloads
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