TY  - JOUR
AU  - Aizenman,Joshua
AU  - Glick,Reuven
TI  - Military Expenditure, Threats, and Growth
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9618
PY  - 2003
Y2  - April 2003
UR  - http://www.nber.org/papers/w9618
L1  - http://www.nber.org/papers/w9618.pdf
N1  - Author contact info:
Joshua Aizenman
Department of Economics;  E2
1156 High St.
University of California, Santa Cruz
Santa Cruz, CA  95064
Tel: 831/459-4791
Fax: 831/459-5077
E-Mail: jaizen@ucsc.edu

Reuven Glick
Economic Research Department
Federal Reserve Bank of San Francisco
101 Market Street
San Francisco, CA  94105
Tel: 415/974-3184
Fax: 415/974-2168
E-Mail: reuven.Glick@sf.frb.org
AB  - 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.
ER  -