Military expenditure and economic growth in Middle Eastern countries and Turkey: a non-linear panel data approach

The economic growth effects of military expenditure have been the subject of a large literature in defence economics. Theories on the economic impacts of military expenditure greatly differ and include arguments that they either enhance economic growth or crowd out productive investments. Empirical literature on defence expenditure and economic growth nexus generally employs linear specifications to investigate the impact of defence expenditures on economic growth. Although it is now well established that many economic variables may have a non-linear data-generating mechanism, it seems that this reality has long been neglected in empirical work on defence–growth nexus. This paper attempts to fill this gap by employing non-linear panel data models to examine the effects of military expenditures on economic growth for Middle Eastern countries and Turkey, for the time period 1988–2012. Results show that the effect of military expenditure on economic growth is nonlinear such that the state of the economy actually determines the effect of the former on the latter. This is important not only in showing asymmetric relationship between these variables but also in revealing the reasons of mixed results of earlier literature.     

A note on optimal pricing for finite capacity queueing systems with multiple customer classes

This article investigates optimal static prices for a finite capacity queueing system serving customers from different classes. We first show that the original multi‐class formulation in which the price for each class is a decision variable can be reformulated as a single dimensional problem with the total load as the decision variable. Using this alternative formulation, we prove an upper bound for the optimal arrival rates for a fairly large class of queueing systems and provide sufficient conditions that ensure the existence of a unique optimal arrival rate vector. We show that these conditions hold for M/M/1/m and M/G/s/s systems and prove structural results on the relationships between the optimal arrival rates and system capacity. © 2008 Wiley Periodicals, Inc. Naval Research Logistics, 2008     

Revenue maximization in two-station tandem queueing systems

We study optimal pricing for tandem queueing systems with finite buffers. The service provider dynamically quotes prices to incoming price sensitive customers to maximize the long-run average revenue. We present a Markov decision process model for the optimization problem. For systems with two stations, general-sized buffers, and two or more prices, we describe the structure of the optimal dynamic pricing policy and develop tailored policy iteration algorithms to find an optimal pricing policy. For systems with two stations but no intermediate buffer, we characterize conditions under which quoting either a high or a low price to all customers is optimal and provide an easy-to-implement algorithm to solve the problem. Numerical experiments are conducted to compare the developed algorithms with the regular policy iteration algorithm. The work also discusses possible extensions of the obtained results to both three-station systems and two-station systems with price and congestion sensitive customers using numerical analysis.     

Dissolution of an Empire: Insights from the İstanbul Bourse and the Ottoman War Bond

During the transformation period of the Ottoman Empire leading to the Republic of Turkey, many conflicts took place between 1918 and 1923. These conflicts interrupted the servicing of the Ottoman war bond. The reimbursement likelihood of this bond was related to the outcomes of First World War and the hostilities. This paper analyses the impacts of First World War and hostilities on the risk assessments regarding the Ottoman war debt, using manually collected data on the price of the Ottoman war bond traded at the ?stanbul bourse between 1918 and 1925. The empirical results imply that the defeat of the Bulgarian army and the peace offer of Austria-Hungary were associated with the increasing premium demanded by investors of the bond. The victories of the Turkish National Movement and the peace offer of the Allies to end the hostilities by 1922 positively affected the likelihood of the servicing of the debt.     

Military Expenditures,Income Inequality,Welfare and Political Regimes: A Dynamic Panel Data Analysis

The goal of this paper is to investigate the relationship between type of welfare regimes and military expenditures. There is a sizeable empirical literature on the development of the welfare state and on the typology of the welfare regimes. There appear to be, however, no empirical studies that examine welfare regimes with special attention to military spending. This study aims at providing a comprehensive analysis on the topic by considering several different welfare regime typologies. To do so, we use dynamic panel data analysis for 37 countries for the period of 1988–2003 by considering a wide range of control variables such as inequality measures, number of terrorist events, and size of the armed forces. We also replicate the same analyses for the political regimes. Our findings, in line with the literature, show that there is a positive relationship between income inequality and share of military expenditures in the central government budget, and that the number of terrorist events is a significant factor that affects both the level of military expenditure and inequality. Also, the paper reveals a significant negative relationship between social democratic welfare regimes and military expenditures.     

“What is dear to you?” Survey of beliefs regarding protection of critical infrastructure against terrorism

Up to the present, there is only very little research on how the population perceives terrorism and its threats, even though support from the population is crucial for effective counterterrorism. By eliciting beliefs and subjecting them to content analyses, six factors were found that determine the protection worthiness of a target in the people's view: the potential damage to “people,” “symbolism,” “economy,” “politics,” “nature,” and “image/publicity.” These empirically found factors are in line with factors specified by terrorist target selection models. They differ in the strength of their cognitive representation among participants and, thus, their subjective importance to the people. The first three factors are shared among all participants, whereas the latter ones could only be found in a part of the participant sample. People's judgments of the targets' protection worthiness differ substantially from their judgments of the targets' attractiveness to terrorists, even though the same factors seem to be involved. This study offers an insight into the people's mental model about protection worthiness of targets. Together with classical risk analysis and knowledge about terrorists, these results can form a basis for setting up a holistic scheme for critical infrastructure protection.     

Panel Causality Analysis Between Defence Expenditure and Economic Growth in Developed Countries

There is much controversy in the literature over whether military expenditures have a positive, negative or no relation impact on economic growth. The aim of this paper is to determine the relationship between GDP and defence expenditure. The study analyses GDP and defence expenditures of the developed countries with cross-sectional ADF and SURADF unit root tests using annual data for the years 1980–2007. We conclude that in the long term, according to the Pedroni cointegration test, there exists a relationship between defence expenditure and economic growth. Furthermore, by utilizing the Granger causality test, we find that defence expenditure is a factor in economic growth. In other words, our study validates the hypothesis that defence spending by economically developed countries positively contributes to their economics.     

Budgetary trade-offs of security expenditures in Turkey

This paper investigates the budgetary trade-off structure of security (defence+internal security) expenditures in Turkey for the period 1983-1998. A modified version of Todaro's distributive share index of social welfare is used to quantify the impacts on the growth of primary budget expenditures of Security, Education, Health, General Administration, Infrastructure, and Social Services. We find that defence expenditures dominate overall security expenditures and are less affected in times of bottlenecks in the economy. A systematic pattern of negative budgetary trade-offs of security expenditures in terms of other components is not identified. We also analyse the expenditures of the Defence Industry Support Fund in an attempt to find the cost of the modernisation program to the economy.     

AN ECONOMIC ANALYSIS OF SECURITY POLICIES

This paper analyses public policy choices in the security economy from an economic perspective. It discusses the role of public goods for national and global security and identifies the importance of the first‐ and second‐order indirect effects of insecurity on economic activity, which include the behavioural responses of agents and the government to security measures, akin to such effects in insurance economics. Furthermore, key public policy trade‐offs are outlined, in particular between security and efficiency, globalisation, equity and freedom. The analysis identifies suitable policy options for raising security in the national and international contexts and in view of these trade‐offs. A balance between market and non‐market instruments in achieving security should be aimed for in order to minimise the adverse effects of aiming for higher security. In addition, the public good nature of security implies that international coordination of security policies is important, despite this process being fraught with enforcement problems.