ABSTRACT
Regardless of the problems facing the defense–growth relationship, the issue of how a nation's defense expenditures affect its overall economic growth has been an area of concern and contention to both academics and politicians for some time. To explore the defense–growth relationship, two dominant approaches have been used: a Feder–Ram-based approach and an augmented Solow approach. The most common model that is used to explain the defense–growth relationship is a variation of the Feder–Ram model. Although the literature on the defense–growth relationship has relied heavily on the Feder–Ram model, Dunne, Smith, and Willenbockel criticized the model, arguing that the approach ignores the mainstream growth literature. In order to compare the Feder–Ram and augmented Solow models as developed in the previous section, data from the Islamic Republic of Iran were collected for the years 1960–2007. Further developments in the defense–growth relationship should strive toward better addressing these indirect effects through multi-equation modeling techniques.
