The Peace Dividend: Military Spending Cuts and Economic Growth
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. 1995/053
Subject:
Capacity utilization Defense spending Expenditure Human capital International trade Labor Production Production growth Trade barriers
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
Pages:
40
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