Modeling the Defense-Growth Relationship around the Globe

Abstract

One of the most important questions stemming from the end of the cold war is how reductions in defense spending will affect economic performance. This question has significant policy implications for countries facing public demands for defense cutbacks and countries still maintaining high levels of military spending for security. However, previous studies on the defense-growth relationship have reported mixed findings. Thus, this study investigates how the changes in defense burden will affect economic growth by testing the economic effects of defense spending on growth in 80 countries using a nonlinear defense-growth model that includes technological progress. The results reveal that two thirds of the countries under investigation may expect a “peace dividend” due to the negative relationship between defense spending and economic growth.

Migration, Openness and the Global Preconditions of ‘Smart Development

“…But the significant negative effects of military expenditures (on Happy Life Years, smart gender justice, the two formulations of the overall smart development index) or military personnel rates (smart democracy) on smart development rather support the arguments of quantitative peace research during the last decades with its apprehensions against very high military spending rates (Auvinen and Nafziger, 1999;Heo, 1998;Mintz and Stevenson, 1995).…”

U.S. Troops and Foreign Economic Growth

“…Two channels have been postulated: the within-country relationship between defense spending and economic growth (usually found to be negative: inter alia, Heo (1998), Mintz and Stevenson (1995), and the surveys of Ram (1995) and Dunne, Smith, and Willenbockel (2005)), and the relationship between military conflict and economic growth (inter alia., Weede (1993), Murdoch and Sandler (2002), Reuveny and Thompson (2002)). These literatures leave completely unanswered the question of whether large numbers of country A's troops hosted by country B robustly predicts an improvement in B's economy.…”

Military Draft and Economic Growth in Oecd Countries

“…By and large, military spending does not seem to contribute positively to economic well-being and growth. Some studies have found that especially at low levels of economic development military expenditure may go along with positive externalities (e.g., public infrastructure development, technology spillover effects) that promote economic growth (Crespo-Cuaresma and Reitschuler, 2003;Hooker and Knetter, 1997;Heo, 1998). These studies mainly employ the so-called Feder-Ram model; other studies, using mainstream growth models, do not identify a statistically significant effect of military expenditure on growth or even show clearly negative impacts (e.g., Knight et al, 1996).…”