Military spending and economic growth
Date
2003-10
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Abstract
This paper determines the influence of defense expenditures and military labor on economic growth in 18 Asian countries from 1989 to 1999. The framework used is a modified Barro model that considers the institutional and military effects on economic growth. To determine whether the outcome would change significantly by altering the samples, the model is also applied to four sub-groupings: top military spenders, top aid recipients, top spenders and recipients and ASEAN countries. Empirical evidence reveals that the influence of military spending and the military use of labor on economic growth are both nonlinear. The shape of the defense burden function though, is affected by the samples used. For the entire sample of 18 countries and the first three sub-groupings, low levels of military spending have a negative influence on economic growth. As military spending continues to expand, this negative influence decreases and eventually turns positive. In addition, low levels of military labor have a positive influence on economic growth. But as more labor is taken away from the civilian sector, the net effect becomes negative. However, limiting the sample to the Southeast Asian region, generates opposite results. Low levels of military spending increase growth, but higher levels decrease it. With respect to military personnel, low levels of military labor use decrease economic growth but higher levels increase it. This discrepancy is attributed to the smaller sample size, and the fact that the ASEAN is a free trade region, proving the sensitivity of results on the sampling process used.
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Keywords
Military spending, Defense expenditure, Government spending, Economic growth, Military power