NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Military Expenditure, Threats, and Growth

Joshua Aizenman, Reuven Glick

NBER Working Paper No. 9618
Issued in April 2003
NBER Program(s):   EFG   ITI

This paper clarifies one of the puzzling results of the economic growth literature: the impact of military expenditure is frequently found to be non-significant or negative, yet most countries spend a large fraction of their GDP on defense and the military. We start by empirical evaluation of the non-linear interactions between military expenditure, external threats, corruption, and other relevant controls. While growth falls with higher levels of military spending, given the values of the other independent variables, we show that military expenditure in the presence of threats increases growth. We explain the presence of these non-linearities in an extended version of Barro and Sala-i-Martin (1995), allowing the dependence of growth on the severity of external threats, and on the effective military expenditure associated with these threats.

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Document Object Identifier (DOI): 10.3386/w9618

Published: Joshua Aizenman & Reuven Glick, 2006. "Military expenditure, threats, and growth," Journal of International Trade & Economic Development, Taylor and Francis Journals, vol. 15(2), pages 129-155, June. citation courtesy of

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