MILITARY EXPENDITURES, ECONOMIC GROWTH AND SPATIAL SPILLOVERS


YILDIRIM ÖCAL J., ÖCAL N.

DEFENCE AND PEACE ECONOMICS, vol.27, no.1, pp.87-104, 2016 (Journal Indexed in SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 27 Issue: 1
  • Publication Date: 2016
  • Doi Number: 10.1080/10242694.2014.960246
  • Title of Journal : DEFENCE AND PEACE ECONOMICS
  • Page Numbers: pp.87-104
  • Keywords: Military expenditure, Economic growth, Spatial data analysis, DEFENSE EXPENDITURES, PEACE-DIVIDEND, ETHNIC DIVERSITY, CAUSAL-ANALYSIS, UNITED-STATES, CIVIL-WARS, MODEL, FRACTIONALIZATION, ECONOMETRICS, INSTITUTIONS

Abstract

The relationship between economic growth and military expenditure has been the subject of a large literature in defence economics. This study analyses the influence of military expenditures on economic growth in a global perspective for the time period 2000-2010 taking spatial dimension into account. The augmented Solow model is employed to investigate the defence-growth nexus using the cross-sectional data relating to 128 countries. Following a traditional regression analysis, spatial variations in the relationships are examined utilizing different spatial econometric specifications estimated by maximum likelihood. The regressions are compared with each other via likelihood ratio tests, and the spatial Durbin model is found to be the most appropriate one suggesting that the typical least-squares model is misspecified. Empirical evidence indicates that military expenditure has a positive effect on economic growth with a significant spatial dependence for the time period under consideration.