The impact of military expenditures on economic growth in the less developed countries∗

This paper presents the results of empirical research on the economic impact of military expenditure — milex — on the less developed countries. The hypothesis is that the impact on growth is a combination of three effects: (1) increased security — positive impact; (2) diversion of resources from productive investment — negative impact; and (3) pressure for more efficient government policies in response to the external threat — positive impact. The combination of these effects would produce a non‐linear relationship with the growth rate at first increasing as milex increased and then decreasing. For the full sample of 71 countries, we found the predicted relationship, however, it is not robust to changes in the sample. The robust conclusion is that there was no evidence of a negative impact of military spending on economic growth.     

Guns for Butter? Empirical Evidence from China

Abstract

This study examines the causal nexus between defence spending and education expenditure in China using the bootstrap Granger full-sample causality test and sub-sample rolling window estimation. The full-sample result indicates that there is no causality between defence spending and education expenditure. By adopting a time-varying rolling window approach to revisit the dynamic causal relationships, this article identifies a negative unidirectional causality running from education expenditure to defence spending. The finding suggests that it is the education expenditure crowds out defence spending in China rather than reverse. No causality is demonstrated from defence spending to education expenditure, indicating that an increase in military spending will not crowd out expenditure on education. The results could be partly explained by that the education expenditure in China is below the requirement of corresponding economic growth, urging for more financial budget. Whereas the findings support a negative trade-off between defence and education expenditures, they refute the theory of ‘guns for butter’.     

Military expenditure and economic development in China: an empirical inquiry

Increases in military spending have a big impact on the socioeconomic conditions in any country. However, there is no consensus as to whether the rising military expenditure is beneficial or detrimental to economic growth. The present study chose China as a case study to empirically examine a complex relationship between military expenditure and economic development. The findings from the Johansen cointegration test indicated that there existed a long-run relationship between China’s military spending and economic growth. Furthermore, the Granger causality test detected a unidirectional causality from economic development to military expenditure. These results were further confirmed by the findings from the impulse response function. This means that China represents an example of a developing economy where the size of military expenditure expands in the process of economic transformation.     

Empirical Investigation into the Determinants of Terrorism: Evidence from Fragile States

Abstract

This study investigates the determinants of terrorism in countries that are in the top category of the Fragile States Index (FSI), and are also prone to terrorism. Panel data for 38 countries mainly from Sub-Saharan Africa, the Middle East and North Africa, and South Asia for the years 2005–2014 are used. Findings from the negative binomial and fixed effects estimation show that fragile state, number of refugees and youth unemployment have positive and significant impacts on terrorism. Military spending is positive but less robust across models. Conversely, FDI and remittances have a negative impact on terrorism with the former less robust. Governance and foreign aid are negative and insignificantly related to terrorism. Policy implications follow from the findings.     

Sovereign debt,deficits and defence spending: the case of Greece

Abstract

The outbreak of the sovereign debt crisis at the end of 2009 in Greece led to a severe recession, and constant economic problems. This paper investigates military expenditure among others as a potential factor to the growth of sovereign debt in Greece over the period 1960 until currently. Our empirical findings suggest that high deficits, inflation and military spending have been the primary causes of debt growth in Greece. The structural break models reveal a much higher effect of deficits and inflation in the post-1990 period while the threshold switching regression, based on the level of sovereign debt, indicate that for levels of debt-to-GDP ratio above 90% deficits, inflation and military expenditures had significantly more pronounced effects on government debt changes.     

The Effects of Defence Spending Reductions: A CGE Estimation of the Foregone Peace Dividend in the Case of Greece

With the collapse of bipolarity and the end of the East-West armaments race, defence budgets have shrunk and military expenditures across many countries have fallen, opening-up the prospect of potential beneficial economic spin-offs. In the case of Greece, a country with a higher than average defence burden, military spending has not exhibited similar downward trends as it has done in other members of NATO and the European Union. The paper, using a Computable General Equilibrium model, estimates through simulations the effects on the Greek economy had reductions in current defence spending been equal to the NATO average. The results from the CGE estimations suggest that a shift of expenditure from defence into non-defence public spending would have an appreciable beneficial impact.     

Does Military Spending Nonlinearly Affect Economic Growth in South Africa?

Using annual data collected from 1988 to 2015, this study provides evidence of a non-linear relationship between military spending, economic growth and other growth determinants for the South African economy. The empirical study is based on estimates of a logistic smooth transition regression (LSTR) model and our empirical results point to an inverted U-shaped relationship between military spending and economic growth for the data. Furthermore, our empirical results suggest that the current levels of military spending, as a component of total government expenditure, are too high in the South African economy and need to be transferred towards more productive non-military expenditure in order to improve the performance of economic growth and other growth determinants.     

The Demand for Turkish Defence Expenditure

Although a number of studies concerning Turkish defence-growth relation have been published in recent years, little attention is given the demand for Turkish defence expenditure. This is an important issue for understanding which variables contribute to the determination of the demand for military expenditure. However, it is difficult to develop a general theory or a standard empirical approach for the determination of the demand military expenditure. This study models and estimates the demand for Turkish defence expenditure for the period 1951-1998 using autoregressive distributed lag approach to cointegration (ARDL) following the methodology outlined in Pesaran and Shin (1999). This procedure can be applied regardless of the stationary properties of the variables in the sample and allows for inferences on long-run estimates, which is not possible under alternative cointegration procedures. The findings suggest that Turkish defence spending is determined by NATO's defence spending, Greece's defence spending and some security considerations.     

What Goes Up Must Come Down: Military Expenditure and Civil Wars

Abstract

This paper examines the impact of civil war on military expenditure. We employ two measures of military expenditure: the share of military expenditure in general government expenditure and the logarithm of military expenditures. We would reasonably expect a priori that military expenditure as a share of general government expenditure increases during a civil war and that such increases would taper off over the duration of a civil war. We also explore whether the termination of a civil war induces a decline in the share of military expenditure as a share of the general government expenditure in the short-run. We find evidence the of share of military expenditure increases during a civil war and falls in the year succeeding the end of a civil war, and, in particular, if a war ends in a peace treaty. The level of military expenditures, however, rises during civil wars and does not appear to decline in the short-term after the end of a civil war.     

Clash of counterterrorism-assistance-seeking states and their super power sponsors: Implications on the war against Boko Haram

ABSTRACT

Decade-long security cooperation and counterterrorism engagements in Nigeria have failed to bring down Boko Haram or at least weaken its terrorist structures and transnational spread. I argue that disconnects between counterterrorism-assistance seeking states and their superpower sponsors are implicated in the intractability of Boko Haram's insurgency in Nigeria. Why is the U.S. counterterrorism intervention to individual MNJTF countries (i.e. troop contribution, military funding and intelligence support) ‘lopsided’, ‘fragmented’ and ‘unevenly distributed;’ and how are these implicated in the fight against Boko Haram terrorism? This has impacted negatively on MNJTF countries – lack of cooperation, divisiveness and individualism in coordinating and forging offensives against Boko Haram. These concerns interface several blind spots in the picture of external influences on military’s approach to Boko Haram. I elicit primary data from top military officers. I conclude by predicting the implications and consequences of these counterterrorism complexities, and their potency to defeat or encourage Boko Haram terror.     

National security,military spending and the business cycle

This paper develops a Dynamic Stochastic General Equilibrium model where national security is an argument in the agent’s utility function and the government chooses optimally the level of military spending to maximize social welfare. National defense depends on military expenditure and on the strategic environment reflecting a potential hostile external threat. We use aggregate data on consumption, investment, and military spending for the US economy to estimate the parameters of the model. Estimation results suggest that consumption and national defense are complements and that military spending variability is mainly explained by external threat shocks although it also depends on the macroeconomic conditions. We compute impulse response functions of the main macroeconomic variables to several shocks: a total factor productivity shock, a defense technology shock, and a strategic environment shock. Surprisingly, we find that the optimal response to an increase in the external threat (a worsening in the strategic environment) will rise output by reducing consumption and increasing investment.     

EVALUATING NATO LONG RUN DEFENSE BURDENS USING UNIT ROOT TESTS

This study evaluates NATO long run defense burdens by analyzing the time‐series properties of burden measures, namely growth of defense spending, defense share in national output, defense share in government spending, defense spending per capita, and defense share in total NATO spending for the time period 1949–2002. The study also compares the effect of using government Purchasing Power Parity conversion factors and Market Exchange Rates for defense share in total NATO expenditure conversions and the implications of NATO expansion in light of the defense burden measures of the newer NATO members.     

The growth in military expenditure in Germany 1951–2011: did parties matter?

We examine whether government ideology was correlated with the growth in military expenditure in Germany over the period 1951–2011. Using various measures of government ideology, the results do not show any effect. The exception is an ideology measure based on the Comparative Manifesto Project (left-right scale): using this measure, the results show that the growth in military expenditure increased by about 2.4 percentage points, when the ideology variable (right-wing) increased by one standard deviation. This effect, however, is based on observations until the early 1960s and cannot be generalized. The major political parties agreed on how to evaluate international risks and threats. Government ideology retired to the background. We conjecture that the consensus among the major parties will persist – even if military spending needs to be increased in response to new international risks and threats.     

The demand for military spending in the peripheral economies of Europe

Research on the factors that determine the level of military expenditure or military burden in countries, suggest that the dynamics of the determinants of military spending will be best understood by case studies of individual countries and studies of groups of relatively homogeneous countries. This paper provides a comparative analysis of three of the EU's peripheral economies - Greece, Portugal and Spain. A simple model based on a general theory of the demand for military spending provides the basis for an investigation of the relative importance of strategic and other social and economic factors for the three countries.     

The ligaments of counter-terrorism regime: sexual violence and the vicarious traumatisation of female non-governmental organisation workers: evidence from Nigeria

ABSTRACT

There is a dearth of studies on indirect victims of sexual violence in counter-terrorism efforts. Using Nigeria as a case study, this paper argues that global and state-level counter-terrorism policies have generally failed to account for the psychological effects of the engagement of female NGO workers in counter-terrorism operations or mitigating the effects of terrorism in conflict zones. Specifically, there has been an increase in sexual violence perpetrated by some members of the security agencies involved in counter-terrorism operations in North-eastern Nigeria. As a result, female NGO workers carry out Medicare, psychosocial counselling and advocacy for these victims. Female NGO workers become exposed to the trauma of victims of sexual violence, which affects their mental health and thus performances in counter-terrorism activities in the country. This altered their worldview on issues of safety even among secured locations or among the presence of security agents and reinforced feelings of powerlessness.     

Does Military Spending Explode External Debt in Pakistan?

This paper investigates the effect of military spending on external debt in case of Pakistan for the period of 1973–2009. For this purpose, the autoregressive distributed lag bounds testing approach to cointegration is used to examine cointegration among the variables. The ADF, P-P, and ADF-GLS unit root tests are applied to test the integrating order of the variables. The Ordinary Least Square (OLS) and error correction method regressions are used to investigate the marginal impact of military spending on external debt in the long and short run. Our findings indicate the existence of cointegration that confirms the presence of a long-run relationship among military spending, external debt, economic growth, and investment. Further, our results reveal that a rise in military spending increases the stock of external debt; an increase in investment also increases external debt; however, there is an inverse effect of economic growth on external debt. An implication of the findings reported herein is that there is a need to formulate a comprehensive economic policy for curtailing external debt in case of Pakistan.     

Defense–Growth Causality: Considerations of Regime-Switching and Time- and Country-Varying Effects

This paper develops a panel smooth transition vector autoregressive model to investigate the economic growth–defense causality. This model simultaneously resolves the estimation problems of endogeneity, heterogeneity, and nonlinearity. Empirical results support that the causality is bidirectional, nonlinear, time- and country-varying. Economic growth has a negative impact on military spending and vice versa. The larger the HDI, the smaller the negative causality. Evidently, the increase in the level of country development can reduce the negative impact of military outlays on economic growth. Reducing the ratio of military spending to GDP is beneficial for countries with low HDI scores; however, moderately increasing the share of military expenditure is favorable for countries with extremely high HDI scores. Policy authority needs to set optimal education, health, and economic development shares of GDP for purchasing a maximum economic growth rate.     

Military Expenditure,Endogeneity and Economic Growth

Abstract

While not always a concern for the general economic growth literature, the debate over the effects of military spending on growth continues to develop, with no consensus, but a deepening understanding of the limitations of previous work. One important issue that has not been adequately dealt with is the endogeneity of military spending in the growth equation, mainly because of the difficulty of finding any variables that would make adequate instruments. This paper considers this issue, using an endogenous growth model estimated on a large sample of 109 non-high-income countries for the period 1998–2012. The empirical analysis is framed within an instrumental variable setting that exploits the increase in military spending that occurs when unrest in a country escalates to turmoil. The estimation results show that endogeneity arising from reverse causality is a crucial issue, with the instrumental variable estimates providing a larger significant negative effect of military spending on growth than OLS would. This result is found to be robust to different sources of heterogeneity and different time periods.     

Military Spending,Conflict and External Debt in Sub-Saharan Africa

The damaging economic effects of the debt crises on Africa in the late 1980s encouraged considerable research on the determinants of external debt in developing economies. Although sub-Saharan Africa's (SSA) debt was cut by two-thirds by 2008, through two debt relief programmes, debt in the region has since been rising at an increasingly rapid pace. This study provides an empirical analysis of the determinants of external debt in SSA over the period 1960–2016, using dynamic panel methods. It also considers two potentially important factors that have received relatively little attention. One is military spending, rarely considered, despite a number of well-publicised scandals over the procurement of unnecessary and expensive high-tech weapons systems. A second, is the possibility that the countries studied have been involved in conflict. The empirical results point to a positive impact of military spending on external debt, but with some evidence of heterogeneity across the countries. Furthermore, findings indicate that the positive effect of military expenditure on debt becomes more marked in countries that have been affected by conflict. These results imply that policies to improve security and reduce military spending could be beneficial in reducing external debt and, potentially, improving economic performance in the region.     

Rising Tide,Dispersing Waves: Opportunities and Challenges for Chinese Seapower Development

Abstract

This article surveys China’s current naval forces and considers key dynamics and possible Chinese naval futures to 2020, the projected end of Beijing’s ‘strategic window of opportunity’, the idea that a peaceful external environment for economic development, globalization, and integration of China into the global economy allows China to benefit from diversion of US attention to countering terrorism. It considers broad possibilities through 2030, the general limit of public US government projections, and by which time multiple factors will likely slow China’s growth and compete for leadership focus and resources.