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.