Military Spending and Economic Growth: A Longitudinal Analysis

Program year: 1990/1991Digitized from print original stored in HDRThe question of how defense spending affects economic growth has been important to both economist and political scientists for many years. The numerous works that have been written on the subject, however, have failed to produce any meaningful consensus as to whether defense spending encourages or discourages economic growth. Much of this failure can be attributed to the lack of a compelling theory of defense spending's economic effects. without such a theory to guide researchers, the work that has been done has tended to vary widely in its theoretical justifications and thus, in its model specifications and research strategies. Some recent literature, however, has attempted to remedy many of these problems by introducing a model of the relationship between defense spending and the economy that is based on a compelling and well established model of economic growth (Mintz and Huang 1991a,b,c; Ram 1986, Ward 1991a). This paper is an attempt to further the work of these authors in three ways. First, section one will explore the development of this new model, and demonstrate how it is based on a compelling model of growth that is both well accepted and theoretically driven. Section two will concentrate on explaining the theory behind the inclusion of defense variables in the model. And finally, the last section will test the model for 105 countries over time