Research work · 2001

Military Expenditure Growth and Investment

Ron P Smith, John Paul Dunne

Abstract

This paper uses a panel of data 28 countries over the period 19601997 to examine the relationship between military expenditure, investment and growth. It brie‡y reviews the economic theory, emphasising the di¢cult identi…cation issues involved in determining the interaction between military expenditure and output and discusses econometric methods for panels. Then it provides estimates of various models examining the interaction between the three variables. The data do not suggest any strong relations between military expenditure and either investment or growth. This is not unexpected given the theoretical and econometric problems involved.