ON THE RELATIONSHIP BETWEEN MILITARY EXPENDITURE, THREAT, AND ECONOMIC GROWTH: A NONLINEAR APPROACH

Albert J.F. Yang, William N. Trumbull, Chin Wei Yang and Bwo‐Nung Huang

Defence and Peace Economics, 2011, vol. 22, issue 4, 449-457

Abstract: The main objective of the paper is to decipher the military expenditure--economic growth relationship, taking the level of economic development (income) into consideration. Our findings suggest the following: (i) military expenditure has a significantly negative relationship to economic growth for the 23 countries with initial incomes (threshold variable) less than or equal to $475.93; (ii) when the threat level is heightened, economic growth (23 countries) is expected to decrease. However, military expenditure in the presence of sufficiently large threats increases growth; (iii) for the remaining 69 countries whose initial incomes (real GDP per capita in 1992 price) exceed $475.93, no significant relationship exists whether the threat variable is taken into consideration or not.

Date: 2011
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DOI: 10.1080/10242694.2010.497723

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