PL EN
 
PL EN
Current Issue
Past Issues
About the Journal
For Authors
Contact Us
2/2023 vol. 314
Stats
CC-BY 4.0
Get citation
RESEARCH PAPER
Can We Have More Butter and Guns Simultaneously? An Endogeneity Perspective
Rafał Woźniak 1
,
 
Jacek Lewkowicz 1
 
 
 
More details
Hide details
1
Faculty of Economic Sciences, University of Warsaw, Poland
 
 
Submission date: 2022-12-27
 
 
Final revision date: 2023-04-30
 
 
Acceptance date: 2023-06-12
 
 
Publication date: 2023-06-30
 
 
Corresponding author
Jacek Lewkowicz   

Faculty of Economic Sciences, University of Warsaw, Poland
 
 
GNPJE 2023;314(2):28-46
DOI: https://doi.org/10.33119/GN/168221
 
 
Article (PDF)
Supplementary files
References (76)
 
KEYWORDS
economic development
military expenditures
arms race
endogeneity
 
JEL CLASSIFICATION CODES
H56
N40
O11
P48
 
ABSTRACT
Drivers and outcomes of military expenditures are an important topic in geopolitics and public debate. It is often argued that increases in the military budget can boost the economy through extended military equipment production. What should then be noticeable is a feedback relationship between military expenditures and the current state of the economy. This paper investigates this reverse relationship at the macro level using an unbalanced panel dataset of 173 countries over the period 1949–2020. Our empirical analysis implies that the claimed positive feedback loop between military expenditures and economic growth is either completely absent or, at most, very weak.
REFERENCES (76)
1.
Albalate D., Bel G., Elias F. [2012], Institutional determinants of military spending, Journal of Comparative Economics, 40 (2): 279–290.
Google Scholar
 
 
2.
Alley J. [2021], Alliance Participation, Treaty Depth, and Military Spending, International Studies Quarterly, 65 (4): 929–943.
Google Scholar
 
 
3.
Anderson T. W., Hsiao C. [1982], Formulation and Estimation of Dynamic Models Using Panel Data, Journal of Econometrics, 18: 67–82.
Google Scholar
 
 
4.
Arellano M., Bond S. R. [1991], Some Specification Tests for Panel Data: Monte Carlo Evidence and an Application to Employment Equations, Review of Economic Studies, 58: 43–77.
Google Scholar
 
 
5.
Arellano M., Bover O. [1995], Another Look at the Instrumental Variables Estimation of Error-Component Models, Journal of Econometrics, 68: 29–51.
Google Scholar
 
 
6.
Baltagi B. H. [2013], Econometric Analysis of Panel Data, Fifth Edition, Wiley.
Google Scholar
 
 
7.
Baltagi B. H., Levin D. [1986], Estimating Dynamic Demand for Cigarettes Using Panel Data: The Effects of Bootlegging, Taxation, and Advertising Reconsidered, Review of Economics and Statistics, 68: 148–155.
Google Scholar
 
 
8.
Barro R. J. [1998], Determinants of Economic Growth: A Cross-Country Empirical Study, The MIT Press.
Google Scholar
 
 
9.
Batchelor P., Dunne P., Lamb G. [2002], The Demand for Military Spending in South Africa, Journal of Peace Research, 39 (3): 339–354.
Google Scholar
 
 
10.
Beliakova P., Perlo-Freeman S. [2018], Corruption in the Russian Defense Sector, World Peace Foundation, 5: 1–21.
Google Scholar
 
 
11.
Biddle S., Long S. [2004], Democracy and Military Effectiveness: A Deeper Look, Jorunal of Conflict Resolution, 48 (4): 525–546.
Google Scholar
 
 
12.
Blundell R., Bond S. [1998], Initial Conditions and Moment Restrictions in Dynamic Panel Data Models, Journal of Econometrics, 87: 115–144.
Google Scholar
 
 
13.
Borch C., Wallace M. [2010], Military Spending and Economic Well-Being in the American States: The Post-Vietnam War Era, Social Forces, 88 (4): 1727–1752.
Google Scholar
 
 
14.
Bove V., Brauner J. [2016], The demand for military expenditure in authoritarian regimes, Defence and Peace Economics, 27 (5): 609–625.
Google Scholar
 
 
15.
Bove V., Efthyvoulou G., Navas A. [2017], Political cycles in public expenditure: butter vs guns, Journal of Comparative Economics, 45 (3): 582–604.
Google Scholar
 
 
16.
Bove V., Elia L. [2014], The impact of American and British involvement in Afghanistan and Iraq on health spending, military spending and economic growth, The B. E. Journal of Macroeconomics, 14 (1): 325–339.
Google Scholar
 
 
17.
Brauner J. [2015], Military spending and democracy, Defence and Peace Economics, 26 (4): 409–423.
Google Scholar
 
 
18.
Brueckner J. [2003], Strategic interaction among governments: An overview of empirical studies, International Regional Science Review, 26 (2): 175–188.
Google Scholar
 
 
19.
Cappelen A., Gleditsch N. P., Bjerkholt O. [1984], Military Spending and Economic Growth in the OECD Countries, Journal of Peace Research, 21 (4): 361–373.
Google Scholar
 
 
20.
Cavicchioli M., Pistoresi B. [2016], Testing threshold cointegration in Wagner’s Law: The role of military spending, Economic Modelling, 59: 23–31.
Google Scholar
 
 
21.
Chang T., Lee Ch. Ch., Hung K., Lee H. K. [2014], Does Military Spending Really Matter for Economic Growth in China and G7 Countries: The Roles of Dependency and Heterogeneity, Defence and Peace Economics, 25 (2): 177–191.
Google Scholar
 
 
22.
Clements B. J., Gupta S., Khamidova S. [2021], Is military spending converging to a low level across countries?, Economic Modelling, 94: 433–441.
Google Scholar
 
 
23.
Compton R. A., Paterson B. [2016], Military Spending and Growth: The Role of Institutions, Defence and Peace Economics, 27 (3): 301–322.
Google Scholar
 
 
24.
Coppedge M., Gerring J., Knutsen C. H., Lindberg S. I., Teorell J., Alizada N., Altman D., Bernhard M., Cornell A., Fish M. S., Gastaldi L., Gjerløw H., Glynn A., Hicken A., Hindle G., Ilchenko N., Krusell J., Lührmann A., Maerz S. F., Marquardt K. L., McMann K., Mechkova V., Medzihorsky J., Paxton P., Pemstein D., Pernes J., Römer J. von, Seim B., Sigman R., Skaaning S. V., Staton J., Sundström A., Tzelgov E., Wang Y., Wig T., Wilson S., Ziblatt D. [2021], V–Dem [Country – Year/Country – Date] Dataset v11.1, Varieties of Democracy.
Google Scholar
 
 
25.
Deger S., Sen S. [1991], Military Expenditure, Aid, and Economic Development, The World Bank Economic Review, 5 (issue suppl. 1): 159–186.
Google Scholar
 
 
26.
Desli E., Gkolgkoutsika A. [2021], Military spending and economic growth: a panel data investigation, Economic Change and Restructuring, 54: 781–806.
Google Scholar
 
 
27.
Desli E., Gkolgkoutsika A., Katrakilidis C. [2017], Investigating the Dynamic Interaction between Military Spending and Economic Growth, Review of Development Economics, 21 (3): 511–526.
Google Scholar
 
 
28.
Dimitrakis P. [2009], The Value to CENTO of UK Bases on Cyprus, Middle Eastern Studies, 45 (4): 611–624.
Google Scholar
 
 
29.
Dizaji S. F. [2019], Trade openness, political institutions, and military spending (evidence from lifting Iran’s sanctions), Empirical Economics, 57: 2013–2041.
Google Scholar
 
 
30.
Dizaji S. F., Farzanegan M. R. [2021], Do Sanctions Constrain Military Spending of Iran?, Defence and Peace Economics, 32 (2): 125–150.
Google Scholar
 
 
31.
Douch M., Solomon B. [2014], Middle Powers And The Demand For Military Expenditures, Defence and Peace Economics, 25(6): 605-618.
Google Scholar
 
 
32.
Dudley L., Montmarquette C. [1981], The demand for military expenditures: An international comparison, Public Choice, 37: 5–31.
Google Scholar
 
 
33.
Dunne J. P. [2012], Military Spending, Growth, Development And Conflict, Defence and Peace Economics 23 (6): 549–557.
Google Scholar
 
 
34.
Dunne P., Nikolaidou E. [2001], Military expenditure and economic growth: A demand and supply model for Greece, 1960–96, Defence and Peace Economics, 12 (1): 47–67.
Google Scholar
 
 
35.
Dunne J. P., Perlo-Freeman S., Smith R. P. [2008], The demand for military expenditure in developing countries: hostility versus capability, Defence and Peace Economics, 19 (4): 293–302.
Google Scholar
 
 
36.
Dunne J. P., Vougas D. [1999], Military Spending and Economic Growth in South Africa: A Causal Analysis, Journal of Conflict Resolution, 43 (4): 521–537.
Google Scholar
 
 
37.
d’Agostino G., Dunne J. P., Lorusso M., Pieroni L. [2020], Military Spending, Corruption, Persistence and Long Run Growth, Defence and Peace Economics, 31 (4): 423–433.
Google Scholar
 
 
38.
d’Agostino G., Dunne J. P., Pieroni L. [2017], Does Military Spending Matter for Long-run Growth?, Defence and Peace Economics, 28 (4): 429–436.
Google Scholar
 
 
39.
Farzanegan M. R. [2014], Military Spending and Economic Growth: The Case of Iran, Defence and Peace Economics, 25 (3): 247–269.
Google Scholar
 
 
40.
Farzanegan M. R. [2018], The Impact of Oil Rents on Military Spending in the GCC Region: Does Corruption Matter?, Journal of Arabian Studies, 8 (issue suppl. 1): 87–109.
Google Scholar
 
 
41.
George J., Sandler T. [2018], Demand for military spending in NATO, 1968–2015: A spatial panel approach, European Journal of Political Economy, 53: 222–236.
Google Scholar
 
 
42.
Gleditsch N. P. [1992], Defense without Threat? The Future of Norwegian Military Spending, Cooperation and Conflict, 27 (4): 397–413.
Google Scholar
 
 
43.
Gupta S., Mello L. de, Sharan R. [2001], Corruption and military spending, European Journal of Political Economy, 17 (4): 749–777.
Google Scholar
 
 
44.
Hayo B., Neumeier F. [2012], Leaders’ Impact on Public Spending Priorities: The Case of the German Laender, Kyklos, 65 (4): 480–511.
Google Scholar
 
 
45.
Henderson E. A. [1998], Military Spending and Poverty, Journal of Politics, 60 (2).
Google Scholar
 
 
46.
Henke M., Maher R. [2021], The populist challenge to European defense, Journal of European Public Policy, 28 (3): 389–406.
Google Scholar
 
 
47.
Holman M. R. [2014], Sex and the City: Female Leaders and Spending on Social Welfare Programs in U. S. Municipalities, Journal of Urban Affairs, 36 (4): 701–715.
Google Scholar
 
 
48.
Hooker M. A., Knetter M. M. [1997], The Effects of Military Spending on Economic Activity: Evidence from State Procurement Spending, Journal of Money, Credit and Banking, 29 (3): 400–421.
Google Scholar
 
 
49.
Hwang S. H. [2012], Technology of military conflict, military spending, and war, Journal of Public Economics, 96 (1–2): 226–236.
Google Scholar
 
 
50.
Kollias Ch., Paleologou S. M. [2019], Military spending, economic growth and investment: a disaggregated analysis by income group, Empirical Economics, 56: 935–958.
Google Scholar
 
 
51.
Kuehn D., Trinkunas H. [2017], Conditions of military contestation in populist Latin America, Democratization, 24 (5): 859–880.
Google Scholar
 
 
52.
Leon G. [2014], Strategic redistribution: The political economy of populism in Latin America, European Journal of Political Economy, 34: 39–51.
Google Scholar
 
 
53.
Lskavyan V. [2011], Democracy levels and the income – military expenditure relationship, Applied Economics Letters, 18 (15): 1485–1489.
Google Scholar
 
 
54.
Lührmann A., Düpont N., Higashijima M., Kavasoglu Y. B., Marquardt K. L., Bernhard M., Döring H., Hicken A., Laebens M., Lindberg S. I., Medzihorsky J., Neundorf A., Reuter O. J., Ruth-Lovell S., Weghorst K. R., Wiesehomeier N., Wright J., Alizada N., Bederke P., Gastaldi L., Grahn S., Hindle G., Ilchenko N., Römer J. von, Wilson D., Pemstein D., Seim B. [2020], Varieties of Party Identity and Organization (V-Party) Dataset V1, Varieties of Democracy (V–Dem) Project.
Google Scholar
 
 
55.
Mavisakalyan A. [2014], Women in cabinet and public health spending: evidence across countries, Economics of Governance, 15: 281–304.
Google Scholar
 
 
56.
McNamara R. S. [1991], The Post-Cold War World: Implications for Military Expenditure in the Developing Countries, The World Bank Economic Review, 5 (issue suppl. 1): 95–126.
Google Scholar
 
 
57.
Mercille J. [2018], Mind the Gap: Security ‘Crises’ and the Geopolitics of US Military Spending, Geopolitics, 13 (1): 54–72.
Google Scholar
 
 
58.
Miyamoto W., Nguyen T. L., Sheremirov V. [2019], The effects of government spending on real exchange rates: Evidence from military spending panel data, Journal of International Economics, 116: 144–157.
Google Scholar
 
 
59.
Moore M. [2010], Arming the Embargoed: A Supply-Side Understanding of Arms Embargo Violations, Journal of Conflict Resolution, 54 (4): 593–615.
Google Scholar
 
 
60.
Mylonidis N. [2008], Revisiting the Nexus between Military Spending and Growth in the European Union, Defence and Peace Economics, 19 (4): 265–272.
Google Scholar
 
 
61.
Nincic M., Cusack T. R. [1979], The Political Economy of US Military Spending, Journal of Peace Research, 16 (2): 101–115.
Google Scholar
 
 
62.
Pan Ch. I., Chang T., Wolde-Rufael Y. [2015], Military Spending and Economic Growth in the Middle East Countries: Bootstrap Panel Causality Test, Defence and Peace Economics, 26 (4): 443–456.
Google Scholar
 
 
63.
Phillips B. J. [2015], Civil war, spillover and neighbors’ military spending, Conflict Management and Peace Science, 32 (4): 425–442.
Google Scholar
 
 
64.
Ringsmose J. [2009], Paying for Protection: Denmark’s Military Expenditure during the Cold War, Cooperation and Conflict, 44 (1): 73–97.
Google Scholar
 
 
65.
Thies W. J. [1987], Alliances and Collective Goods: A Reappraisal, Journal of Conflict Resolution, 31 (2): 298–332.
Google Scholar
 
 
66.
Veebel V. [2020], Precision Sanctions: Is Moscow in Trouble Because of Targeted Sanctions? A Deeper Glance at the Progress of the Russian Military Sector Over the Past Decade, The Journal of Slavic Military Studies, 33 (3): 335–354.
Google Scholar
 
 
67.
Ward M. D., Davis D. R. [1992], Sizing up the Peace Dividend: Economic Growth and Military Spending in the United States, 1948–1996, American Political Science Review, 86 (3): 748–755.
Google Scholar
 
 
68.
Wenzelburger G., Böller F. [2020], Bomb or build? How party ideologies affect the balance of foreign aid and defence spending, The British Journal of Politics and International Relations, 22 (1): 3–23.
Google Scholar
 
 
69.
Whitten G. D., Williams L. K. [2011], Buttery Guns and Welfare Hawks: The Politics of Defense Spending in Advanced Industrial Democracies, American Journal of Political Science, 55 (1): 117–134.
Google Scholar
 
 
70.
Wijeweera A., Webb M. J. [2009], Military Spending and Economic Growth in Sri Lanka: a Time Series Analysis, Defence and Peace Economics, 20 (6): 499–508.
Google Scholar
 
 
71.
Wooldridge J. F. [2010], Econometric Analysis of Cross Section and Panel Data, Second Edition, MIT Press.
Google Scholar
 
 
72.
Yakovlev V. [2007], Arms Trade, Military Spending, and Economic Growth, Defence and Peace Economics, 18 (4): 317–338.
Google Scholar
 
 
73.
Yesilyurt M. E., Elhorst P. [2017], Impacts of neighboring countries on military expenditures: A dynamic spatial panel approach, Journal of Peace Research, 54 (6): 777–790.
Google Scholar
 
 
74.
Yildrim J., Sezgin S. [2005], Democracy and Military Expenditure: A Cross-Country Evidence, Transition Studies Review, 12: 93–100.
Google Scholar
 
 
75.
Zhao L., Zhao L., Chen B. F. [2017], The interrelationship between defence spending, public expenditures and economic growth: evidence from China, Defence and Peace Economics, 28 (6): 703–718.
Google Scholar
 
 
76.
Zielinski R. C., Fordham B. O., Schilde K. E. [2017], What goes up, must come down? The asymmetric effects of economic growth and international threat on military spending, Journal of Peace Research, 54 (6): 791–805.
Google Scholar
 
 
Share
Send by email
RELATED ARTICLE
Social Capital and Economic Development: PLS-SEM Model
Foreign Direct Investment in the Indian Economy
Wage Inequality and the Level of Economic Development
The Economic and Political Transformation of Taiwan from a Limited to an Open Access Order
The Wealth and Poverty of Nations in Light of Daron Acemoglu and James A. Robinson’s Theory of Economic Development
Indexes
 
Keywords index
JEL Classification Codes index
Authors index
eISSN:2300-5238
Journals System - logo
The system was developed as part of the task "Digitization of the journal Gospodarka Narodowa," financed under contract 555/P-DUN/2018 from the Ministry of Science and Higher Education funds allocated from the dissemination of science.

© 2006-2024 Journal hosting platform by Bentus
Scroll to top