Budgetary Consequences of Defense Expenditures in Pakistan: Short-Run Impacts and Long-Run Adjustments

Abstract

In the last twenty years, there has been a growing interest in quantifying the 'guns versus butter' tradeoff facing developing countries. This article examines Pakistan's military expenditures between 1973 and 1986 and estimates ·both a short-run impact model and long-run adjustment model to measure how changes in the defense burden, the deficit, and government debt have affected budget allocations to economic services programs and administrative/social programs. In addition, we investigate whether defense budgets have been increased or maintained either at the expense of economic and social programs in general or merely confined to one or two specific programs. Military expenditure patterns are analyzed to see whether or not they were responsible for across-the-board cuts in long-term infrastructure programs. Our analysis indicates that the deficit, the debt service, and the military burden are often interrelated in such a compleic manner that the impact of any specific program is difficult to predict. In the short run, most infrastructure programs increased as the military burden declined. The opposite was generally true for social programs such as social security, welfare, and housing. Changes in the defense budget appear to have only a transitory effect on the share of government expenditures allocated toward infrastructure. The long-run model suggests that social programs have just as high a priority as economic services. When the military burden increases, the government is willing to take some resources from infrastructure programs and lets the deficit grow to finance social programs. Our results also suggest a long run pattern of adjustment in social programs but not infrastructure programsa counter-intuitive result given Pakistan's severe infrastructure constraints.

Power Elites in Pakistan: Creation, Contestations, Continuity

“…Its power could be seen in the government expenditure budgets of that time. While education, health and infrastructure should have been priorities for the country still at an early stage of development, 70 percent of the budget was spent on defence (Frederiksen & Looney, 1994). Little wonder then that Mani (2007) characterised Pakistan as a "weak state and a professional military domain", arguing that Pakistan's state institutions had failed to work effectively from the first decade due to inherent weaknesses but also to Pakistani elites' fierce competition for control of the state.…”

Revisiting the “Guns versus Butter” Argument in China (1950–2014): New Evidence from the Continuous Wavelet Analysis

“…On the other hand, due to government budget constraints, the existence of the crowding-out effect suggests the expansion of defense expenditure can be at the expense of non-defense spending, such as education, health, culture and technology [6][7][8][9][10][11][12]. However, several studies contended that an increase in defense spending does not necessarily have any effect on social welfare spending [13][14][15]. Defense expenditure has no relationship with social welfare spending.…”

“…In addition, Zhang, et al [6] confirmed the positive relationship by measuring the social welfare using inputs and outputs. However, a non-existent relationship has also been found in the literature [13][14][15][19][20][21][22][23]. For instance, Caputo [19] showed defense expenditure has no impact on social welfare in Australia, Sweden, the UK and the US.…”

Government Budget Deficits, Defence Expenditure and Income Distribution: The Case of Turkey*

“…He found that Third World military regimes had a higher defence burden, and a large proportion of the central government budget was devoted to defence. Moreover, Frederiksen and Looney (1994), analyzing Pakistan's defence expenditures for the period 1973-1986 pointed out that the deficit, the debt service and the defence burden are interrelated and the impact of any specific program is difficult to estimate. It was further asserted that, in the short term, there is an inverse relationship between defence burden and infrastructure programs, whereas the opposite is held for social programs such as social security, welfare and housing.…”