Military expenditure is bad for economic growth

What is it about?

Military spending is thought to boost business confidence, particularly in conflicting countries. At the same time, it can lower macroeconomic growth by crowding out investment in economically productive sectors. Unsurprisingly past research on the topic using data from Cold War era remains mixed. However, not only the nature of conflict has changed in post-Cold War, military expenditure has also risen in the non-western world. Therefore we revisit the debate over the effect of military expenditure on economic growth in post-Cold War era in 70 developing countries.

Featured Image

Why is it important?

Ours is arguably the most updated analysis of the effect of military expenditure on economic growth in developing countries in the post-Cold War period. The research not only distinguishes between external conflict and internal (civil) war, we also address concern over the fact that military spending itself can be a function of economic growth. The findings show that the positive influence of military expenditure on economic growth is sensitive to methods and model specification used. This therefore provides one answer for why past studies have often disagreed in terms of the growth effect of military expenditure.