Defence expenditures have both costs and benefits to the economy. The costs of defence expenditures are mainly emphasized as opportunity costs. On the other hand, defence spending may have growth-promoting potential benefits: a rise in defence spending may result in a higher aggregate demand,...

The hostility between India and Pakistan is believed to have led to an arms race between the two countries, which might have contributed to their retarded economic growth. This paper investigates this twin problem of arms race and economic growth for the time period 1949-2003. The empirical...