| Description |
What is the nature of the impact of military expenditure on economic development in developing countries? Results of past studies using diverse approaches to this question are very mixed. Those results include positive, negative, or no effects of military expenditure on economic development. It all depends on different approaches, sample countries, time period, and data sources. In order to resolve these problems, there is a need to decompose the research problem into several separate questions: what kind of impact and how does it occur; the impact of what (measures of defense burden) on what (measures of economic performance); what are the opportunity costs of chosen policies; and what are the policy implications of the impact? In order to perform consistent analysis of these diverse research questions using a uniform set of regression equations, this dissertation will adapt the structuralist approach used by Faini, Annez, and Taylor who modified the "patterns of development" approach developed by Chenery and Syrquin. Seventeen dependent variables are analyzed as a function of military burden, globalization index, net financial inflow, GDP per capita, and population. These dependent variables include investment and savings, private and public consumption, education and health spending, agricultural and industrial output, unemployment rate, export and import, foreign direct investment, urbanization rate, income distribution, life expectancy, literacy rate, and infant mortality rate. Regression analyses were run on the data set consisting of data from 119 developing countries between 1960 and 2010. Results of the analyses revealed that the nature of the impact of military expenditure on economic development is mostly negative. It has negative impacts on capital formation, industrialization, and social well-being. Structuralists pay particular attention to industrialization and capital formation because they are the most crucial factors of economic development for any developing country. Social well-being, measured by physical quality of life, is central to the expanded definition of economic development. Negative impact of military expenditure on these crucial aspects of economic development is the most significant findings of this dissertation. On the other hand, the increase in military expenditures seems to decrease the unemployment rate, and there seems to be no negative trade-offs between military expenditures and education and health spending. The policy implication from this analysis is that the military expenditure should not be seen as a tool for economic development in developing countries. It is not development promoting as Benoit suggested, but it is actually development hampering. It may have a power to absorb unskilled workers to alleviate unemployment rate, but its negative impact reaches far greater aspects of economic development. Its negative impact on industrialization, capital formation, and physical quality of life means that the increase in the military expenditure will not help promote economic development in the developing countries. |
