Military expenditure and economic growth in developing countries : evidence from system GMM estimates

Abstract

Evaluating the effects of defense expenditure on economic growth in developing countries has been examined by many empirical studies. On the other hand, there is little consensus on that impact and the variety seems to come from imply of different models and different estimators. The paper aims at contributing to the literature by utilizing a recently constructed economic growth data set and controlling for defense expenditure, covering a large set of countries and an extended time period, the study reveals further evidence on the relationship between economic growth and military spending. This study integrates the system Generalized Method of Moments (GMM) estimators to analysis the impact of defense expenditure on economic growth between 2002 and 2010 for 67 developing countries. The findings indicate that military spending has a positive and significant effect on economic growth in the sample countries. Our empirical results strongly support the Bionit's who found that government military spending is helpful to economic growth regardless of how we measure the government size and economic growth. When the countries are disaggregated by income levels and the degree of corruption.