The Peace Dividend : Military Spending Cuts and Economic Growth

Author/Editor:

Malcolm D. Knight ; Delano Villanueva ; Norman Loayza

Publication Date:

May 1, 1995

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Although conventional wisdom suggests that reducing military spending may improve a country’s economic growth performance, empirical studies have produced ambiguous results. This paper extends a standard growth model and estimates it using techniques that exploit both cross-section and time-series dimensions of available data to obtain consistent estimates of the growth-retarding effects of military spending via its adverse impact on capital formation and resource allocation. Model simulations suggest that a substantial long-run “Peace Dividend”--in the form of higher capacity output--may result from: (i) markedly lower military expenditure levels achieved in most regions during the late 1980s; and (ii) further military spending cuts that would be possible in the future if a global peace could be secured.

Series:

Working Paper No. 95/53

Notes:

Also published in Staff Papers, Vol. 43, No. 1, March 1996.

English

Publication Date:

May 1, 1995

ISBN/ISSN:

9781451847338/1018-5941

Stock No:

WPIEA0531995

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

40

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