Assessing the Effects of Military Expenditure on Growth

Military spending is an expenditure by governments that has influence beyond the resources it takes up, especially when it leads to or facilitates conflicts. This chapter provides an overview of the issues involved in analysing the effects of military spending on growth. It considers the alternative general economic theories that inform the development of models to undertake empirical analyses, and estimation issues in undertaking those analyses. The Feder-Ram model, the modified Solow and the endogenous growth models, are discussed in detail, before being estimated to illustrate the issues involved in estimating the models and to compare their performance.