Tests for Granger causality have become an important tool for researchers investigating the relat... more Tests for Granger causality have become an important tool for researchers investigating the relationship between military spending and growth. These analyses of the dynamics of the relationship have focused upon case studies of individual countries and studies of groups of relatively homogeneous countries. This paper contributes to the literature by considering three of the EU's poorest, peripheral economies Greece, Portugal and Spain. The impact of military spending is important for these countries as they do have an opportunity to reduce military expenditures if they benefit from improved security arrangements within the EU and Europe. This paper investigates the relation between military burden and growth for the countries, using Granger causality methods within a cointegrating VAR framework to improve upon previous analyses. The results from these different methods are not consistent and indicate the problems of drawing inferences across even relatively homogeneous economies. The cointegrating VAR results for Greece suggest a positive impact of military burden on growth, contrary to the negative effect for Spain, while for Portugal, there is no evidence of any causal links.
Tests for Granger causality have become an important tool for researchers investigating the relat... more Tests for Granger causality have become an important tool for researchers investigating the relationship between military spending and growth. These analyses of the dynamics of the relationship have focused upon case studies of individual countries and studies of groups of relatively homogeneous countries. This paper contributes to the literature by considering three of the EU's poorest, peripheral economies Greece, Portugal and Spain. The impact of military spending is important for these countries as they do have an opportunity to reduce military expenditures if they benefit from improved security arrangements within the EU and Europe. This paper investigates the relation between military burden and growth for the countries, using Granger causality methods within a cointegrating VAR framework to improve upon previous analyses. The results from these different methods are not consistent and indicate the problems of drawing inferences across even relatively homogeneous economies. The cointegrating VAR results for Greece suggest a positive impact of military burden on growth, contrary to the negative effect for Spain, while for Portugal, there is no evidence of any causal links.
Analysing the relationship between military spending and growth has been an important area of emp... more Analysing the relationship between military spending and growth has been an important area of empirical research. Early studies focussed on large cross sections of countries, but criticisms of these led to a focus on case studies of individual countries and studies of groups of relatively homogeneous countries. Granger causality methods have also become common techniques for such analyses, both as single equation analyses and more recently, within a cointegrating VAR framework. This paper does two things. First it provides an empirical analysis of three of the EU's poorest, peripheral economies, namely Greece, Portugal and Spain. It also considers the range of available Granger causality techniques and compares their results. It finds that the results differ across the methods used, indicating the problems with earlier studies, and across the countries, indicating the problems of drawing inferences across even relatively homogeneous economies.
The debate over the economic effects of military spending continues to develop, with no consensus... more The debate over the economic effects of military spending continues to develop, with no consensus, but a deepening understanding of the issues and limitations of previous work. A recent survey has suggested that the inclusion of post Cold War data has tended to make finding a negative effect more common, but issues remain (Dunne and Tian, 2013). One particularly important issue that has not been adequately dealt with, is the possible endogeneity of military spending in the growth equation, mainly because of the difficulty of finding any variables that would make adequate instruments. This paper considers the likely importance of endogeneity, using conflict onset as an instrument for military spending in an endogenous growth model for a panel of African countries 1989-2010. Following a brief review of the literature the theoretical and empirical models are outlined and the use of conflict onset as an instrumental variable for military spending in the panel estimates is justified. The empirical analysis suggests that endogeneity is likely to be an important issue and using IV estimation provides a larger significant negative effect for military spending on growth than OLS. It also identifies a further potential bias in the same direction in studies not including non-military spending in the growth equation. These results imply that the damaging effects of military spending on growth in Africa are being underestimated in most studies. While it is clear that conflict onset is a suitable and successful instrument in this analysis, the results are not directly generalisable. Conflict onset is unlikely to be applicable to a larger and more diverse panel of countries. What is of general concern is the finding that endogeneity is important and is likely to be influencing the results of studies of military spending and growth. It is important that future research tries to deal with endogeneity and the search for reasonable instruments is one that needs to engage researchers.
Page 1. Cambridge Journal of Economics 1984, 8, 297-310 COMMENTARY This section is designedfor th... more Page 1. Cambridge Journal of Economics 1984, 8, 297-310 COMMENTARY This section is designedfor the discussion and debate of current economic problems. Contributions which raise new issues or comment on issues already raised are welcome. ...
This chapter provides an analytical survey of models explaining the level of military expenditure... more This chapter provides an analytical survey of models explaining the level of military expenditure, emphasizing empirical econometric models based on optimizing behavior. After setting out the standard neo-classical model in which nation states are represented as ...
Offsets, arrangements that obligate the arms seller to reinvest ("offset") arms sales proceeds in... more Offsets, arrangements that obligate the arms seller to reinvest ("offset") arms sales proceeds in the purchasing country, are an increasingly important facet of the international trade in arms. They are used to justify spending on imports by promises that there will be significant benefits to the economy, through the promotion and development of local industry, technology and employment. Until recently, however, there has been little research on how well offsets work in practice. This paper is a 'state-of-the-art' review of our empirical knowledge regarding arms trade offsets. We find virtually no case where offset arrangements have yielded unambiguous net benefits for a country's economic development. As a general rule arms trade offset deals are more costly than 'off-the-shelf' arms purchases, create little by way of new or sustainable employment, do not appear to contribute in any substantive way to general economic development, and with very few exceptions do not result in significant technology transfers, not even within the military sector.
Wars can be immensely damaging to economies, and they can leave long-lasting scars on society. Wh... more Wars can be immensely damaging to economies, and they can leave long-lasting scars on society. What are considered to be postwar or postviolence situations can see ongoing nonwar political, domestic, and criminal violence, with war economies not ending with the formal cessation of hostilities. Unarmed violence can have important effects and even forms of nonviolent conflict can carry substantial, measurable economic consequences. Surprisingly little substantive economics work on the subject is done particularly work that would deal with the possible paths countries can take from crises and there seems to exist an unfortunate lack of understanding among economists of the complexities of war and violence and its impact on economy and society, leaving a sometimes unrecognized legacy of violence and loss. This essay deals with some of the issues involved.
Peace Economics Peace Science and Public Policy, 2005
Copyright c 2005 by the authors. All rights reserved. No part of this publication may be re-produ... more Copyright c 2005 by the authors. All rights reserved. No part of this publication may be re-produced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written ...
This chapter provides a survey of research on the defense industrial base (DIB) focusing on the a... more This chapter provides a survey of research on the defense industrial base (DIB) focusing on the advanced industrial capitalist economies. It starts by looking at the problems of definition and measurement and how these have been dealt with in practice. This is followed by an ...
The first reference to a military industrial complex (MIC) was made by US President Eisenhower in... more The first reference to a military industrial complex (MIC) was made by US President Eisenhower in 1961. He then referred to something historically specific: the build-up of a large permanent military establishment and a permanent arms industry, which raised his concerns for the unwarranted influence of these societal forces. Subsequently the meaning of the MIC evolved to refer to the vested interests within the state and industry in expanding the military sector and in increasing military spending, with external threats providing the justification. During the Cold War, when the defence was strongly focused on deterrence, this produced a set of specific state-industry relationships that in turn generated a beneficial environment for the development and strengthening of the MIC. With the end of the Cold War, the conditions for a strong MIC were less favourable, at least initially, with changes in the international security environment, cuts in military spending and arms production, and ensuing privatisation, commercialisation, and internationalisation of military activities as well as of arms production. This paper discusses how the MIC has been affected by these changes and the degree to which there has been continuity of old power structures and a continuing MIC.
Economía del Rosario agradece a los autores la cesión de la versión en español. Los autores desea... more Economía del Rosario agradece a los autores la cesión de la versión en español. Los autores desean agradecer a Javier Juárez Pérez, Juan Fernando Vargas y Jennifer A. Salamanca Z. por su apoyo en la revisión de la versión en español del documento. Todos los errores restantes son responsabilidad de los autores.
This second issue of The EPS Journal takes up the theme of economic aspects of peacemaking and pe... more This second issue of The EPS Journal takes up the theme of economic aspects of peacemaking and peacekeeping. Economics Nobel-Laureate Lawrence R. Klein reviews the arguments for, and the likely cost of, a standing United Nations peacekeeping force. ...
There is considerable debate over the effects of both corruption and government spending on growt... more There is considerable debate over the effects of both corruption and government spending on growth, but few studies have considered how the interaction government spending and corruption affects economic growth. This paper starts from an endogenous growth model and extends it to account for the effects of corruption on the potentially productive components of government spending, namely military and investment spending. The resulting model is estimated on a comprehensive panel of countries and the results show that interaction between corruption and both investment and military spending has a strong negative impact on economic growth. The results also indicate important complementarities between corruption and military spending, suggesting that combating corruption will not only have direct positive effects, but is also likely to have positive indirect effects, through reducing the size of the negative impact of military burden. These are found to be robust results and suggest that policies to both reduce corruption and military burdens, possibly through policies such as regional security agreements, would have a considerable impact on economic growth.
The recent recession has seen something of resurgence in the debate over military Keynesianism. R... more The recent recession has seen something of resurgence in the debate over military Keynesianism. Recent commentators who should no better have claimed that it would make sense to stimulate the US economy through increases in military spending, as though this has not been a commonly contested view over the last 40 years. A large literature has debated the economic effects of military spending and while it has reached no consensus, there is also little support for any belief that military spending is a good way of stimulating the economy. This paper makes a contribution to the debate by assessing the theoretical perspectives and the empirical approaches used. It then undertakes an analysis of the US using a number of approaches and the results suggest that the simple Military Keynesian arguments still lack empirical support.
This paper considers the link between arms spending and economic growth for developing countries,... more This paper considers the link between arms spending and economic growth for developing countries, in particular whether high spending on arms is likely to have a negative effect on economic growth and what benefits that might be gained by reducing it. The literature is complex and difficult to summarize, with studies differing theoretically, in the empirical methods they use, in the coverage of countries and time series, and in their quality and significance. Nevertheless, the paper argues that the empirical analyses suggests that there is little or no evidence for a positive effect on economic growth and that it is more likely to have a negative effect, or at best no significant impact at all. Thus, reducing arms and military spending need not be costly and can contribute to, or at the very least provide the opportunity for, improved economic performance in developing countries. This paper is based on work undertaken for Oxfam. We are grateful to Jurgen Brauer, Michael Brzoska, Katherine Nightingale, Donald Mclellan and Ron Smith for helpful comments.
Tests for Granger causality have become an important tool for researchers investigating the relat... more Tests for Granger causality have become an important tool for researchers investigating the relationship between military spending and growth. These analyses of the dynamics of the relationship have focused upon case studies of individual countries and studies of groups of relatively homogeneous countries. This paper contributes to the literature by considering three of the EU's poorest, peripheral economies Greece, Portugal and Spain. The impact of military spending is important for these countries as they do have an opportunity to reduce military expenditures if they benefit from improved security arrangements within the EU and Europe. This paper investigates the relation between military burden and growth for the countries, using Granger causality methods within a cointegrating VAR framework to improve upon previous analyses. The results from these different methods are not consistent and indicate the problems of drawing inferences across even relatively homogeneous economies. The cointegrating VAR results for Greece suggest a positive impact of military burden on growth, contrary to the negative effect for Spain, while for Portugal, there is no evidence of any causal links.
Tests for Granger causality have become an important tool for researchers investigating the relat... more Tests for Granger causality have become an important tool for researchers investigating the relationship between military spending and growth. These analyses of the dynamics of the relationship have focused upon case studies of individual countries and studies of groups of relatively homogeneous countries. This paper contributes to the literature by considering three of the EU's poorest, peripheral economies Greece, Portugal and Spain. The impact of military spending is important for these countries as they do have an opportunity to reduce military expenditures if they benefit from improved security arrangements within the EU and Europe. This paper investigates the relation between military burden and growth for the countries, using Granger causality methods within a cointegrating VAR framework to improve upon previous analyses. The results from these different methods are not consistent and indicate the problems of drawing inferences across even relatively homogeneous economies. The cointegrating VAR results for Greece suggest a positive impact of military burden on growth, contrary to the negative effect for Spain, while for Portugal, there is no evidence of any causal links.
Analysing the relationship between military spending and growth has been an important area of emp... more Analysing the relationship between military spending and growth has been an important area of empirical research. Early studies focussed on large cross sections of countries, but criticisms of these led to a focus on case studies of individual countries and studies of groups of relatively homogeneous countries. Granger causality methods have also become common techniques for such analyses, both as single equation analyses and more recently, within a cointegrating VAR framework. This paper does two things. First it provides an empirical analysis of three of the EU's poorest, peripheral economies, namely Greece, Portugal and Spain. It also considers the range of available Granger causality techniques and compares their results. It finds that the results differ across the methods used, indicating the problems with earlier studies, and across the countries, indicating the problems of drawing inferences across even relatively homogeneous economies.
The debate over the economic effects of military spending continues to develop, with no consensus... more The debate over the economic effects of military spending continues to develop, with no consensus, but a deepening understanding of the issues and limitations of previous work. A recent survey has suggested that the inclusion of post Cold War data has tended to make finding a negative effect more common, but issues remain (Dunne and Tian, 2013). One particularly important issue that has not been adequately dealt with, is the possible endogeneity of military spending in the growth equation, mainly because of the difficulty of finding any variables that would make adequate instruments. This paper considers the likely importance of endogeneity, using conflict onset as an instrument for military spending in an endogenous growth model for a panel of African countries 1989-2010. Following a brief review of the literature the theoretical and empirical models are outlined and the use of conflict onset as an instrumental variable for military spending in the panel estimates is justified. The empirical analysis suggests that endogeneity is likely to be an important issue and using IV estimation provides a larger significant negative effect for military spending on growth than OLS. It also identifies a further potential bias in the same direction in studies not including non-military spending in the growth equation. These results imply that the damaging effects of military spending on growth in Africa are being underestimated in most studies. While it is clear that conflict onset is a suitable and successful instrument in this analysis, the results are not directly generalisable. Conflict onset is unlikely to be applicable to a larger and more diverse panel of countries. What is of general concern is the finding that endogeneity is important and is likely to be influencing the results of studies of military spending and growth. It is important that future research tries to deal with endogeneity and the search for reasonable instruments is one that needs to engage researchers.
Page 1. Cambridge Journal of Economics 1984, 8, 297-310 COMMENTARY This section is designedfor th... more Page 1. Cambridge Journal of Economics 1984, 8, 297-310 COMMENTARY This section is designedfor the discussion and debate of current economic problems. Contributions which raise new issues or comment on issues already raised are welcome. ...
This chapter provides an analytical survey of models explaining the level of military expenditure... more This chapter provides an analytical survey of models explaining the level of military expenditure, emphasizing empirical econometric models based on optimizing behavior. After setting out the standard neo-classical model in which nation states are represented as ...
Offsets, arrangements that obligate the arms seller to reinvest ("offset") arms sales proceeds in... more Offsets, arrangements that obligate the arms seller to reinvest ("offset") arms sales proceeds in the purchasing country, are an increasingly important facet of the international trade in arms. They are used to justify spending on imports by promises that there will be significant benefits to the economy, through the promotion and development of local industry, technology and employment. Until recently, however, there has been little research on how well offsets work in practice. This paper is a 'state-of-the-art' review of our empirical knowledge regarding arms trade offsets. We find virtually no case where offset arrangements have yielded unambiguous net benefits for a country's economic development. As a general rule arms trade offset deals are more costly than 'off-the-shelf' arms purchases, create little by way of new or sustainable employment, do not appear to contribute in any substantive way to general economic development, and with very few exceptions do not result in significant technology transfers, not even within the military sector.
Wars can be immensely damaging to economies, and they can leave long-lasting scars on society. Wh... more Wars can be immensely damaging to economies, and they can leave long-lasting scars on society. What are considered to be postwar or postviolence situations can see ongoing nonwar political, domestic, and criminal violence, with war economies not ending with the formal cessation of hostilities. Unarmed violence can have important effects and even forms of nonviolent conflict can carry substantial, measurable economic consequences. Surprisingly little substantive economics work on the subject is done particularly work that would deal with the possible paths countries can take from crises and there seems to exist an unfortunate lack of understanding among economists of the complexities of war and violence and its impact on economy and society, leaving a sometimes unrecognized legacy of violence and loss. This essay deals with some of the issues involved.
Peace Economics Peace Science and Public Policy, 2005
Copyright c 2005 by the authors. All rights reserved. No part of this publication may be re-produ... more Copyright c 2005 by the authors. All rights reserved. No part of this publication may be re-produced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written ...
This chapter provides a survey of research on the defense industrial base (DIB) focusing on the a... more This chapter provides a survey of research on the defense industrial base (DIB) focusing on the advanced industrial capitalist economies. It starts by looking at the problems of definition and measurement and how these have been dealt with in practice. This is followed by an ...
The first reference to a military industrial complex (MIC) was made by US President Eisenhower in... more The first reference to a military industrial complex (MIC) was made by US President Eisenhower in 1961. He then referred to something historically specific: the build-up of a large permanent military establishment and a permanent arms industry, which raised his concerns for the unwarranted influence of these societal forces. Subsequently the meaning of the MIC evolved to refer to the vested interests within the state and industry in expanding the military sector and in increasing military spending, with external threats providing the justification. During the Cold War, when the defence was strongly focused on deterrence, this produced a set of specific state-industry relationships that in turn generated a beneficial environment for the development and strengthening of the MIC. With the end of the Cold War, the conditions for a strong MIC were less favourable, at least initially, with changes in the international security environment, cuts in military spending and arms production, and ensuing privatisation, commercialisation, and internationalisation of military activities as well as of arms production. This paper discusses how the MIC has been affected by these changes and the degree to which there has been continuity of old power structures and a continuing MIC.
Economía del Rosario agradece a los autores la cesión de la versión en español. Los autores desea... more Economía del Rosario agradece a los autores la cesión de la versión en español. Los autores desean agradecer a Javier Juárez Pérez, Juan Fernando Vargas y Jennifer A. Salamanca Z. por su apoyo en la revisión de la versión en español del documento. Todos los errores restantes son responsabilidad de los autores.
This second issue of The EPS Journal takes up the theme of economic aspects of peacemaking and pe... more This second issue of The EPS Journal takes up the theme of economic aspects of peacemaking and peacekeeping. Economics Nobel-Laureate Lawrence R. Klein reviews the arguments for, and the likely cost of, a standing United Nations peacekeeping force. ...
There is considerable debate over the effects of both corruption and government spending on growt... more There is considerable debate over the effects of both corruption and government spending on growth, but few studies have considered how the interaction government spending and corruption affects economic growth. This paper starts from an endogenous growth model and extends it to account for the effects of corruption on the potentially productive components of government spending, namely military and investment spending. The resulting model is estimated on a comprehensive panel of countries and the results show that interaction between corruption and both investment and military spending has a strong negative impact on economic growth. The results also indicate important complementarities between corruption and military spending, suggesting that combating corruption will not only have direct positive effects, but is also likely to have positive indirect effects, through reducing the size of the negative impact of military burden. These are found to be robust results and suggest that policies to both reduce corruption and military burdens, possibly through policies such as regional security agreements, would have a considerable impact on economic growth.
The recent recession has seen something of resurgence in the debate over military Keynesianism. R... more The recent recession has seen something of resurgence in the debate over military Keynesianism. Recent commentators who should no better have claimed that it would make sense to stimulate the US economy through increases in military spending, as though this has not been a commonly contested view over the last 40 years. A large literature has debated the economic effects of military spending and while it has reached no consensus, there is also little support for any belief that military spending is a good way of stimulating the economy. This paper makes a contribution to the debate by assessing the theoretical perspectives and the empirical approaches used. It then undertakes an analysis of the US using a number of approaches and the results suggest that the simple Military Keynesian arguments still lack empirical support.
This paper considers the link between arms spending and economic growth for developing countries,... more This paper considers the link between arms spending and economic growth for developing countries, in particular whether high spending on arms is likely to have a negative effect on economic growth and what benefits that might be gained by reducing it. The literature is complex and difficult to summarize, with studies differing theoretically, in the empirical methods they use, in the coverage of countries and time series, and in their quality and significance. Nevertheless, the paper argues that the empirical analyses suggests that there is little or no evidence for a positive effect on economic growth and that it is more likely to have a negative effect, or at best no significant impact at all. Thus, reducing arms and military spending need not be costly and can contribute to, or at the very least provide the opportunity for, improved economic performance in developing countries. This paper is based on work undertaken for Oxfam. We are grateful to Jurgen Brauer, Michael Brzoska, Katherine Nightingale, Donald Mclellan and Ron Smith for helpful comments.
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