ABSTRACT
This chapter examines the likelihood of major "peace dividends" acting as a stimulus to third world economic growth. It addresses the following questions: Did defense expenditures hinder or aid developing countries in the 1980s? and were the linkages from military expenditures to growth different than in previous time periods? The chapter argues that developing countries are likely to show considerable variations with regard to the manner in which defense expenditures affect economic growth. A body of conventional wisdom has amassed concerning the causes and consequences of Third World militarization. Empirical research examining the economic impact of Third World military expenditure utilizing various sub-groupings of countries tended to contradict the findings. A common view holds that heavy defense expenditures divert scarce resources from productive investment and human capital formation. Depending on the relative impact of defense spending, shifts in resources may significantly affect the economic performance of the countries.
