AN ENDOGENOUS GROWTH MODEL OF CAPITAL AND ARMS ACCUMULATION

This paper attempts to examine the effect of an anticipated foreign military threat on the steady‐state growth rate and the transitional behavior of the economy. The modeling strategy follows the Sandler and Hartley (1995 Sandler, T. and Hartley, K. 1995. The Economics of Defense, Cambridge: Cambridge University Press.  [Google Scholar]) and Dunne et al. (2005 Dunne, J.P., Smith, R.P. and Willenbockel, D. 2005. Models of military expenditure and growth: a critical review. Defence and Peace Economics, 16: 449–461. [Taylor & Francis Online], [Web of Science ®] , [Google Scholar]) viewpoints to emphasize the role of national defense in affecting growth from the perspective of both the demand and the supply sides. We thus combine the public capital version of endogenous growth with a framework of competitive arms accumulation. It is found that the key factor determining the steady state and the transitional effects of a rise in the foreign military threat on the home weapon–capital ratio, the consumption–capital ratio, and the rate of economic growth, is the degree of relative risk aversion.     

THE EFFECTS OF THE WORLD DEFENSE INDUSTRY AND US MILITARY AID TO ISRAEL ON THE ISRAELI DEFENSE INDUSTRY: A DIFFERENTIATED PRODUCTS MODEL

This paper models the interactions between the defense industry market structure and the defense needs of Israel, the USA and Western Europe, which produce several heterogeneous defense goods. The model specifies that the defense industries of the US and Europe are ‘large’ while that of Israel is ‘small’. The US military aid to Israel is also an integral part of the model. The results show that net defense costs of Israel are minimal when the number of its defense firms is one. The model predicts that an increase in US military aid reduces Israel’s government expenditure, its defense industry’s profits and its net defense costs.     

The case for demilitarising Lesotho

ABSTRACT

The Kingdom of Lesotho spends around five per cent of its annual budget – some 700 million Maloti ($US52.6 million) in 2017 – on the Lesotho Defence Force (LDF). Lesotho’s geographical position means that the LDF has no meaningful role regarding its primary function of defending the country from external aggression and it hardly engages in its secondary functions. In addition, the LDF has a long history of interference with democratic processes and engaging in human rights abuse. The financial resources currently allocated to the LDF could do far more for security, widely defined, if they were allocated to a number of other government expenditure categories.     

From combat to non-combat action

This paper examines the rationale and centrality of private military and security companies (PMSCs) in humanitarian assistance operations in Sudan, asking why PMSCs are involved in humanitarian assistance operations in Sudan and what the principles underlying their activities are. To answer this question, the paper draws attention to the link between humanitarian crises and PMSC interventions. Where there is no meaningful alternative intervention, undergirded by humanitarian concerns that are also profit driven, PMSCs come in to provide the needed services. The protracted and complicated internal armed conflicts in Sudan, which have lasted for over two decades, have produced as many as 4,8 million internally displaced persons (IDPs) – the single largest number in the world. The kind of humanitarian assistance operations provided by PMSCs in Sudan have become critical to the provision of much-needed services which were inadequately provided by governmental authorities at both unilateral and multilateral levels. This paper argues that the humanitarian crises in Sudan created a regime that permits humanitarian assistance operations by both state and non-state actors.     

Compensating military veterans in South Africa

This article outlines the widespread needs of South African military veterans and the possible consequences if the promises made in the recent Military Veterans Act are not met. The first part of the article defines who generally qualifies as a military veteran, how they are typically compensated in various countries with specific reference to neighbouring southern African countries, and what the consequences are when veterans become disenchanted with the state. The second part focuses on South Africa and the recent debates on military veterans and their entitlements. With reference to the findings of a qualitative study conducted among military veterans, parliamentary debates and media reports, an assessment is made of the demands and affordability of promised benefits and the consequences should the state not deliver. The conclusion is reached that heightened expectations are presently frustrated by slow roll-outs, and this is likely to increase the possibility of protest action. This has now the potential to create further tension within the ruling party and civil society, as the pressure on public finances mounts and demands become unsustainable. The effect this may have on political stability will depend on how the government manages this issue.     

Defence spending and growth in turkey 1954–1993: A causal analysis

This paper investigates the causality issue between military expenditure and growth in the case of Turkey, a strategically located developing country, for the period 1954–1993. Results reported herein reveal the absence of any causal ordering between the variables in question.     

Estimating non‐transparent military expenditures: The case of china (PRC)∗

Data limitations arising from non‐transparency in military expenditure reporting impose significant constraints on economists studying country and comparative developments in this field. This article focuses on the case of China. It reviews the recent literature on China's military expenditure, examines the variance in published estimates, and identifies three factors which help explain the variance: budgetary falsification; non‐budgeted PLA revenue; and the US dollar purchasing‐power parity of the yuan. Conclusions emphasize important policy implications of such variance and suggest a more active role for defence economists in a field of research generating considerable attention from international relations scholars.     

The Effects of Terrorism on Turkish Financial Markets

Abstract

In this research, we analyzed how Turkish financial markets and foreign investors in the stock market reacted to the terror attacks in Turkey. Our analysis, which was performed using the terror index for the stock market and the foreign exchange market, revealed that returns, abnormal returns, and cumulative abnormal returns were not affected by the terror attacks; however, foreign investors in the stock market were affected. When the geographic regions of the terror attacks were analyzed, the findings showed that foreign investors were negatively affected mainly by the terror attacks that occurred in southeast Anatolia. Attack type and target type were important only for foreign investors. An evaluation of the interaction between the terror attacks and the markets with the involvement of the terrorist organizations indicated that only the foreign investors in the stock market were affected by Al-Qaeda and PKK-linked terror attacks. An evaluation of the effect of terror attacks in foreign countries on Turkish financial markets revealed no effect on the domestic stock market and foreign exchange markets. We also examined the volatility spillovers from the terror index to the stock market and found that terrorist attacks increased the volatility of the stock market.     

Proportional use of force in asymmetric military operation

This paper studies a strategic conflict between a state and a non-state military organization. The non-state military organization decides whether to attack or not to attack the state, while the state decides on its counter-measure. If the state uses a high level of violence against the non-state organization, it may be accused by the international community of ‘non-proportional’ use of force, and both sides of the conflict take this possibility into account. The model predicts that it may be rational for the non-state organization to attack the state, even if as a reaction the state will militarily destroy this organization, due to a positive probability the state will be punished by the international community for non-proportional use of violence.     

Do Military Expenditures Crowd-out Health Expenditures? Evidence from around the World, 2000–2013

Abstract

The paper examines the relationship between health and military expenditures using pooled cross-sectional (197 countries) and time series (2000–2013) data. Simultaneous equation models were employed to estimate the relationship between an array of public sector expenditures in order to address potential endogeneity. Our empirical findings strongly support the crowding-out hypothesis whereby increased military expenditures reduce the capacity of government to direct expenditures to health expenditures. These findings were robust to alternative specifications explored in the sensitivity analyses. Compared with upper-middle-income countries, the crowding-out effect became more pronounced among lower-middle-income countries. Consequently, this study shows that increased military expenditures negatively impacts health expenditures, and therefore poses as an important risk factor for population health and individual well-being. Moreover, it is the poorest of nations that are most sensitive to the negative effects of increased military expenditures.