Abstract
The defence-growth nexus has been investigated by many studies and has always been a controversial area of research. By applying an Augmented Solow Growth Model integrated with a military burden variable, this paper examines the effect of military expenditure on economic growth for 21 OECD countries during the period 1960–2009. Different panel estimation methodologies are used to analyze the economic effects of military expenditure. The empirical results suggest that military expenditure would appear to have a negative effect on growth.
Acknowledgments
This paper was presented at the Central University of Finance and Economics workshop, “Advances in Defense & Peace Economics and Peace Science,” 8–11 November, 2013. We are grateful for valuable comments from Raul Caruso, Manas Chatterj, Alex Mintz, Partha Gangopadhyay, Urs Luterbacher, Sheldon Levy, Steve Pickering and all other participants of the workshop. We would like to extend our special thanks to Prof. Steve Pickering for his careful review of this paper as well as anonymous referees. This paper is supported by the Centre for Fiscal Development of China, Central University of Finance and Economics.
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