ABSTRACT
There is an impressively large and growing literature on the effects of military spending on economic growth that reflects a continuing lack of consensus. As more data become available that do not reflect the particular geopolitical environment of the cold war, there is more information in the data, which should help researchers in identifying any relation with economic factors. Certainly, the end of the cold war saw sizeable reductions in military expenditure internationally and in recent years the declining trend has bottomed out and military expenditure is once again on the increase, across the medium-and high-income groups. The lowest income group continues to experience declines in military spending and military spending as a share of gross domestic product (GDP) remains the lowest for the low-income countries relative to the other income groups (SIPRI, 2012). World military
Defence and Peace Economics, 2015 Vol. 26, No. 1, 15-31, https://dx.doi.org/10.1080/10242694.2013.848575
J. PA L DUNNEa* AND NAN TIANb
INTRODUCTION
There is an impressively large and growing literature on the effects of military spending on economic growth that reflects a continuing lack of consensus. As more data become available that do not reflect the particular geopolitical environment of the cold war, there is more information in the data, which should help researchers in identifying any relation with economic factors. Certainly, the end of the cold war saw sizeable reductions in military expenditure internationally and in recent years the declining trend has bottomed out and military expenditure is once again on the increase, across the medium-and high-income groups. The lowest income group continues to experience declines in military spending and military spending as a share of gross domestic product (GDP) remains the lowest for the low-income countries relative to the other income groups (SIPRI, 2012). World military
Defence and Peace Economics, 2015 Vol. 26, No. 1, 15-31, https://dx.doi.org/10.1080/10242694.2013.848575
DEFENSE SPENDING, NATURAL RESOURCES, AND CONFLICT
expenditure in 2010 reached $1.6 trillion, representing 2.6% of global GDP or equivalent to $236 per person. While the end of the cold war meant fewer major international conflicts, there was an increase in internal conflicts in the developing world and while the number of conflicts has been declining more recently, they remain a major concern for the developing world. This paper contributes to the existing literature by continuing this investigation with a
particular focus on parameter heterogeneity using a post cold war balanced panel of 104 countries for 1988-2010. The next section briefly reviews the existing literature for developing countries and provides an exposition of the growth model based on Dunne, Smith, and Willenbockel (2005), which includes military spending and overcomes some of the limitations of earlier models. Section 3 provides a discussion of the data-set. Section 4 presents the results of the estimated growth model using the cross-country data and considers the variation in results across various subsamples when the sample is stratified by developed, non-developed; income groups (low, medium, high); conflict (conflict or not; civil, interstate); conflict and income groups; net recipients of aid; natural resources; and trade openness. The final section presents some conclusions.
