Does defence spending matter to employment in Taiwan?

Abstract

This paper investigates an important but neglected issue regarding the economic role of defence spending on employment in Taiwan. The study herein adopts official time series data of yearly defence spending, employment in the private sector, GDP, average monthly salary from 1966 to 2002, and the Autoregressive Distributed Lag (ARDL) approach to the cointegration proposed by Pesaran and Shin (1998 Pesaran MH Shin Y (1998) An autoregressive distributed‐lag modelling approach to cointegration analysis In Econometrics and Economic Theory in the Twentieth Century The Ragnar Frisch Centennial Symposium edited by S. Strom New York Cambridge University Press 371 413 [Crossref] , [Google Scholar]) and Pesaran et al. (2001 Pesaran, MH, Shin, Y and Smith, RJ. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3): 289–326. [Crossref], [Web of Science ®] , [Google Scholar]). The main finding of this study is that defence spending is able to benefit the employment situation in the long run, but damages employment in the short run, which is reasonable but different from the finding in Turkey provided by Yildirim and Sezgin (2003 Yildirim, J and Sezgin, S. (2003). Military expenditure and employment in Turkey. Defence and Peace Economics, 14(2): 129–139. [Taylor & Francis Online], [Web of Science ®] , [Google Scholar]). In addition, the change in real GDP has a positive and significant influence on employment in both the short run and long run