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The effect of military expenditure on growth: an empirical synthesis

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Abstract

Using a sample of 272 meta-observations drawn from 48 primary studies, this paper conducts a meta-analysis of the empirical literature that examines the impact of military expenditure on economic growth. We find that existing studies indicate growth-retarding effects of military expenditure. The results from the meta-regression analysis suggest that the effect size estimate is strongly influenced by study variations. Specifically, we find that underlying theoretical models, econometric specifications, and data type as well as data period are relevant factors that explain the heterogeneity in the military expenditure–growth literature. Results also show that positive effects of military expenditure on growth are more pronounced for developed countries than less developed countries.

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Notes

  1. See Alptekin and Levine (2012) for an overview of the various econometric approaches that examine the ME-G relationship.

  2. The neoclassical or endogenous growth models focus on the supply side, while the Keynesian models focus on the demand side.

  3. Keywords for military expenditure include defence (defense) expenditure OR defence (defense) spending OR military spending OR military expenditure OR defense burden. Keywords for growth include economic growth OR economic development OR GDP OR gross domestic product.

  4. Cohen indicates that an effect size represents a small effect if its absolute value is less than 0.10, a medium effect if it is 0.25 and over, and a large effect if it is greater than 0.4.

  5. The decrease in the number of studies in each cluster leads to a decrease in the variations (factors of heterogeneity) that can be observed. For this reason, there are certain moderator variables that appear in Table 4, but do not appear in Tables 5, 6 and 7.

  6. The Australian Business Dean’s Council (ABDC) and the Australian Research Council (ARC) present classifications for journal quality. Journals are ranked in descending order of quality as A*, A, B, and C. Thus, we introduce a dummy for A* and A ranked journals (high quality) in our MRA and use other ranks as base.

  7. According to Dahal et al. (2003), all nine countries in South Asia have experienced internal conflict in the last two decades. Moreover, more of the conflicts have been in the poorer regions of those countries than elsewhere since 2001 (Iyer 2009).

  8. LDCs such as Saudi Arabia and Russia have increased their ME as a proportion of GDP from 8.1 to 9.3% and from 3.5 to 4.1%, respectively, between 2004 and 2013 IMF (2013). Devarajan et al. (1996) showed that the change in the composition of government spending affects a country’s economic growth.

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Authors and Affiliations

  1. School of Economics, Finance and Marketing, RMIT University, Melbourne, VIC, 3000, Australia

    Sefa Awaworyi Churchill

  2. Department of Economics, Monash University, Caulfield East, VIC, 3145, Australia

    Siew Ling Yew

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  1. Sefa Awaworyi Churchill
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Correspondence to Sefa Awaworyi Churchill.

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Table 8 MRA variables
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Awaworyi Churchill, S., Yew, S.L. The effect of military expenditure on growth: an empirical synthesis. Empir Econ 55, 1357–1387 (2018). https://doi.org/10.1007/s00181-017-1300-z

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