Showing papers in "Defence and Peace Economics in 2015"
TL;DR: This article examined the impact of military expenditure on economic growth on a large balanced panel, using an exogenous growth model and dynamic panel data methods for 106 countries over the period 1988-2010.
Abstract: This paper examines the impact of military expenditure on economic growth on a large balanced panel, using an exogenous growth model and dynamic panel data methods for 106 countries over the period 1988–2010 A major focus of the paper is to consider the possibility group heterogeneity and non-linearity Having estimated the model for all of the countries in the panel and finding that military burden has a negative effect on growth in the short and long run, the panel is broken down into various groupings based upon a range of potentially relevant factors, and the robustness of the results is evaluated The factors considered are different levels of income, conflict experience, natural resources abundance, openness and aid The estimates for the different groups are remarkably consistent with those for the whole panel, providing strong support for the argument that military spending has adverse effects on growth There are, however, some intriguing results that suggest that for certain types of countries
115 citations
TL;DR: Different tactics of terrorists have varied effects on financial markets, which can predict terrorist attacks, which in turn can predict financial markets.
Abstract: Terrorist attacks adversely affect the Pakistani stock market. However, such effect is short-lived: the market recovers from terrorist shocks in one day. The impact of attack depends on the locations and types of attack. The more severe the attack (i.e. more people killed), the more negative is the KSE-100 index return. Most interestingly, stock market contains information about future attacks. In sum, different tactics of terrorists have varied effects on financial markets, which in turn can predict terrorist attacks.
101 citations
TL;DR: This article revisited the causal relationship between military spending and economic growth in 10 Middle East countries via a panel causality analysis that accounts for cross-sectional dependence and heterogeneity across countries, and showed that the empirical evidence does not provide consistent results regarding the relationship between defense expenditure and economic development in these countries.
Abstract: This study revisits the causal relationship between military spending and economic growth in 10 Middle East countries via a panel causality analysis that accounts for cross-sectional dependence and heterogeneity across countries. Our results indicate unidirectional causality from military spending to growth for Turkey; one-way causality from economic growth to military spending for Egypt, Kuwait, Lebanon, and Syria; bidirectional causality for Israel; and no causality in either direction for Jordan, Oman, and Saudi Arabia. The empirical evidence does not provide consistent results regarding the causal relationship between defense expenditure and economic growth in these countries.
63 citations
TL;DR: In this article, the authors examined the relationship between defense and social welfare expenditures using a panel of 29 OECD countries from 1988 to 2005 and found that there is a positive trade-off between military spending and two types of social welfare expenditure (i.e., education and health spending).
Abstract: This article examines the relationship between defense and social welfare expenditures using a panel of 29 OECD countries from 1988 to 2005. It is quite difficult to take into account the simultaneous channels empirically through which the eventual allocation of defense and welfare spending is determined for the guns-and-butter argument. Taking advantage of our collected panel data-set, the panel generalized method of moments method is adopted to control the country-specific heterogeneity and to mitigate the potential simultaneity problem. The main finding of this article suggests a positive trade-off between military spending and two types of social welfare expenditures (i.e. education and health spending). One of the reasons may be that the OECD countries are more supportive of the social welfare programs; therefore, when the military spending is increased (e.g. military personnel and conscripts), the government may raise the health and education spending as well.
47 citations
TL;DR: In this article, the authors studied the effect of natural resources on military spending, using the data from rentier states in the Middle East and North Africa (MENA) countries from 1987 to 2012.
Abstract: It has been argued that the discovery of a new natural resource greatly increases the risk of conflict. This research aims to study the effect of natural resources on military spending, using the data from rentier states in the Middle East and North Africa (MENA) countries from 1987 to 2012. In considering the ‘resource curse,’ the types of natural resources matter. Our empirical results demonstrate that the ‘resource curse’ arising from the abundance of certain natural resources, particularly oil and forest resources, leads to increases in military spending. In contrast, the rent from coal and natural gas has a negative impact on military spending, while the rent from minerals has no impact on military spending, controlling for GDP growth and per capita income.
37 citations
TL;DR: In this article, the authors investigated the relationship between type of welfare regimes and military expenditures and found that there is a positive relationship between income inequality and share of military expenditures in the central government budget.
Abstract: The goal of this paper is to investigate the relationship between type of welfare regimes and military expenditures. There is a sizeable empirical literature on the development of the welfare state and on the typology of the welfare regimes. There appear to be, however, no empirical studies that examine welfare regimes with special attention to military spending. This study aims at providing a comprehensive analysis on the topic by considering several different welfare regime typologies. To do so, we use dynamic panel data analysis for 37 countries for the period of 1988–2003 by considering a wide range of control variables such as inequality measures, number of terrorist events, and size of the armed forces. We also replicate the same analyses for the political regimes. Our findings, in line with the literature, show that there is a positive relationship between income inequality and share of military expenditures in the central government budget, and that the number of terrorist events is a significant ...
36 citations
TL;DR: In this article, the authors re-examine the long-run causal relationship between military expenditure and economic growth in China over the period 1952-2010 and find that the cumulated shocks of military expenditure primarily originate from different components of shocks that relate to economic development rather than the other way round.
Abstract: This paper re-examines the long-run causal relationship between military expenditure and economic growth in China over the period 1952–2010. An empirical econometric analysis based on a Barro-style growth model is conducted. By employing the Bartlett corrected trace test, which provides better approximations of the finite sample distribution to determine the rank of cointegration, the results support the existence of a single long-run equilibrium relationship between the variables. Furthermore, it is confirmed that the cumulated shocks of military expenditure primarily originate from different components of shocks that relate to economic development rather than the other way round.
35 citations
TL;DR: This article examined empirically whether democracies allocate fewer resources to the military than dictatorships and found that democracies spend less on the military as a percentage of GDP than autocracies do and causality runs from regime type to military spending.
Abstract: This paper examines empirically whether democracies allocate fewer resources to the military than dictatorships. It employs a panel of up to 112 countries over the period 1960–2000 to estimate a standard demand for military spending model. While papers on the determinants of military spending generally include democracy as a control variable, with a few exceptions, it is not the focus of their enquiry. This paper addresses resulting problems in the existing literature concerning data quality and the appropriate measurement of key variables, as well as the question of causality between military spending and democracy. It finds that democracies spend less on the military as a percentage of GDP than autocracies do and that causality runs from regime type to military spending.
32 citations
TL;DR: This article found that unforeseen events like terrorist attacks can be linked to the formation of economic sentiment after controlling for sentiment's economic drivers, and that these negative effects are significant only in the post-9/11 era.
Abstract: This study documents that unforeseen events like terrorist attacks can be linked to the formation of Economic Sentiment after controlling for sentiment’s economic drivers. By utilizing dynamic panel techniques, the Economic Sentiment Indicator, as well as one of its constituents Consumer Sentiment, for a pan-European panel of 27 countries appear to be negatively influenced by terrorism activity. Moreover, these negative effects are significant only in the post-9/11 era.
31 citations
TL;DR: In this paper, the authors developed a model to account for the hazard of armed civil conflicts as a manifestation of the natural resource curse, which is mediated by the quality of both economic and political institutions.
Abstract: Natural resources have been blamed for inducing slow growth and sparking civil conflicts and violence. This paper first develops a model to account for the hazard of armed civil conflicts as a manifestation of the natural resource curse, which is mediated by the quality of both economic and political institutions. We then use recently published data on institutional quality and natural resource rents to measure the potential impact of the resource curse on violent civil conflicts using a panel of data for over 100 countries in the period 1970–2010. Our model explicitly accounts for the role of good economic and political institutions in deterring the recourse to violence as well as the extent to which they might weaken the resource rents effect.
30 citations
TL;DR: This article examined the relationship between defense expenditure and income inequality in China for the period of 1989-2012 and provided evidence that China's DE had an impact on INEQ, using basic cointegration and causality tests.
Abstract: There are conflicting views as to the relationship between a nation’s defense expenditure (DE) and its population’s income inequality (INEQ). DE, always an important part of government budget, can easily crowd out transfer payments, necessary to improve INEQ; however, these payments may also create a demand that may raise the income levels of the lower income earners. Consequently, the relationship between DE and INEQ is an important question. This paper examines the relationship between DE and INEQ in China for the period of 1989–2012. Utilizing basic cointegration and causality tests, our objective is to add to the literature by providing evidence that China’s DE, in fact, do have an impact on INEQ.
TL;DR: This paper revisited the causal relationship between military spending and unemployment in the G7 countries applying a bootstrap panel causality analysis that accounts for both cross-sectional dependence and for heterogeneity across countries.
Abstract: We revisit the causal relationship between military spending and unemployment in the G7 countries applying a bootstrap panel causality analysis that accounts for both cross-sectional dependence and for heterogeneity across countries. Using per capita real GDP as a controlled variable, we found a unidirectional causality running from military spending to unemployment for Canada, Japan, and the US, one-way causality running from unemployment to military spending for France and Germany, and bidirectional causality for Italy and the UK. The empirical evidence does not seem to provide consistent results regarding the causal relationship between military spending and unemployment in G7 countries.
TL;DR: In this article, the authors revisited the long run and dynamic causal linkages between defense spending and economic growth in 15 selected European countries for the period 1988-2010 by utilizing recent developments in non-stationary panel data analysis.
Abstract: This study revisits the long run and dynamic causal linkages between defense spending and economic growth in 15 selected European countries for the period 1988–2010 by utilizing recent developments in non-stationary panel data analysis. To this end, the series properties of per capita defense spending, per capita real capita stocks, and per capita real GDP are investigated by the panel unit root tests with and without breaks that support evidence on unit root. The panel cointegration tests with and without breaks are also subsequently employed to investigate whether there exists a long-run equilibrium relationship between these three variables. Finally, our causality analysis from panel vector error-correction model suggests that there is a feedback relation between real capital stock and real GDP in both short and long run, a one-way Granger causality running from real GDP to defense spending in both short and long run, and defense spending only Granger causes real capital stock in the long run.
TL;DR: In this paper, the potential for increased intra-regional trade among 10 countries of the southern and eastern Mediterranean coast was estimated using a panel gravity model of trade for the period 1995-2010, and the main results indicated that the gains realized to date from regional integration have been small, significant potential gains from deep integration exist.
Abstract: Using a panel gravity model of trade for the period 1995–2010, this paper estimates the potential for increased intra-regional trade among 10 countries of the southern and eastern Mediterranean coast. It examines how closer integration through the EU’s revised neighborhood policy can encourage democratisation and conflict resolution. The main results indicate that while the gains realized to date from regional integration have been small, significant potential gains from deep integration exist. The paper proposes that the EU starts by negotiating deep and comprehensive free trade agreements with Egypt, Israel and Jordan provided these countries also negotiate them with each other.
TL;DR: In this paper, the authors explore the impact of strategic assessment efforts on military organizations at war and explore the effect of a principal's choice among imperfect performance metrics for a military operation in doing so, the principal must consider both the incentivizing and informational properties of the metric.
Abstract: We explore the impact of strategic assessment efforts on military organizations at war To do so, we construct a model to explore the impact of a principal’s choice among imperfect performance metrics for a military operation In doing so, the principal must consider both the incentivizing and informational properties of the metric We show the conditions under which uncertainty regarding the nature of the agent, as well as uncertainty regarding the operational environment, drives a metric choice that induces pathological behavior from the agent More specifically, a poor metric choice can create an overly optimistic assessment and end up prolonging the conflict We illustrate the model’s insights in the cases of World War II and the Vietnam War
TL;DR: In this paper, the authors extended the analysis with the inclusion of more EU members and investigated the long run causal ordering between the two variables and found that end of Cold War has significant negative impact on defense expenditures of former east-European countries.
Abstract: Previous empirical studies on the defense spending-economic growth nexus such as Kollias et al. (2007), Mylonidis (2008), Dunne and Nikolaidou (2012) analyzed this relationship in the case of the EU15. This study extends the analysis with the inclusion of more EU members and investigates the long run causal ordering between the two variables. Findings reported herein are not uniformed across all EU members. It is also found that end of Cold War has significant negative impact on defense expenditures of former east-European countries.
TL;DR: This paper examined the effect of rainfall on economic performance in different sectors and conflict onset and found no support for a strong relation between rainfall and conflict as most results are not robust to different model specifications.
Abstract: A number of studies have examined the link between rainfall and conflict but results so far have been inconclusive. This study examines the effect of rainfall on economic performance in different sectors and conflict onset. The empirical analysis finds no support for a strong relation between rainfall and conflict as most results are not robust to different model specifications. The results also do not provide conclusive evidence for a link between growth in specific economic sectors and civil conflict onset.
TL;DR: In this article, the impact of military expenditure on stock market development in 36 countries over the period 1989-2010 is examined, and the results show that military spending has a negative and significant effect on stock performance in the selected countries.
Abstract: This paper examines the impact of military expenditure on stock market development in 36 countries over the period 1989–2010. Within a panel framework, the system GMM estimates is utilised to test the relationship with an array of control variables. We augment the traditional measure of military expenditure–military burden, with a newly constructed comprehensive index – Global Militarisation Index. Overall, the results show that military spending has a negative and significant effect on stock market performance in the selected countries.
TL;DR: In this paper, a version of a simple Keynesian macroeconomic model has been applied a number of times to examine the link between defence spending and economic growth in a range of countries.
Abstract: The issue of guns or butter is one of the most fundamental economic questions, yet there is no consensus on a theoretical framework for examining it. Over the last decade, a version of a simple Keynesian macroeconomic model has been applied a number of times to examining the link between defence spending and economic growth in a range of countries. There are reasons for doubting the soundness of this model as a basis for empirical work.
TL;DR: In this paper, the authors examined the short run behavior of migrant remittances in the face of terrorism and found evidence of increase in the volume of remittance sent from abroad.
Abstract: This paper examines the short-run behaviour of migrant remittances in the face of terrorism. Using monthly data for post 9/11 terrorist attacks in Pakistan, the study finds evidence of increase in the volume of remittances sent from abroad. This increase is evident in the aggregate, as well as for the three main source regions of North America, the Persian Gulf and Europe. The positive association holds for all the top five migrant-hosting countries of Pakistan. The findings point in favour of an altruistic behaviour of migrant remittances at the macroeconomic level.
TL;DR: In this paper, the role of military intelligence in an arms race between two countries was evaluated and it was shown that investment in intelligence is much less beneficial for small government budgets, low intelligence efficiency, and a low degree of conservatism on the part of the policy-maker.
Abstract: This study evaluates the role of military intelligence in an arms race between two countries. The intelligence apparatus of each country evaluates the rival’s capabilities and intentions, and enhances its military capability by increasing the effectiveness of its own weapon systems and reducing the effectiveness of the rival’s weapon systems. Intelligence superiority also yields an advantage in deterrence and preemption. This study shows the following. (a) Investment in intelligence is much less beneficial for small government budgets, low intelligence efficiency, and a low degree of conservatism on the part of the policy-maker. (b) The expenditure on intelligence increases when intelligence efficiency is low and rising, and decreases when intelligence efficiency is high and rising. (c) Being very conservative may be costly to the country. (d) High-quality human capital substantially improves the country’s security and welfare, particularly when the rivals are engaged in a knowledge race in addition to th...
TL;DR: This article presented a macroeconomic model showing quantitatively that an increase in the probability of terror-induced death such as that observed in Israel in 2001-2004 is consistent with the documented contraction of economic activity associated with the impact of terror.
Abstract: It has been shown that terror activities have had a substantial macroeconomic impact. This work presents a macroeconomic model showing quantitatively that an increase in the probability of terror-induced death such as that observed in Israel in 2001–2004 is consistent with the documented contraction of economic activity associated with the impact of terror. The model includes fear of terrorism, represented as a higher level of probability perception than the cumulative-prospect theory expects, and a local government that can supply the public with a security good. The effectiveness of the production of the security good plays an important role in determining the terror-induced loss of production to the economy.
Abstract: This study models the structural sources of variation in the use of selective (discriminate) repression within 89 civil wars fought between 1981 and 2005. The severity of repressive violence is modeled as a function of the amount of territory being contested by the insurgents. This idea is operationalized using measures of the location, size, and density of insurgency violence. The analysis finds evidence that the repressive behavior of both governments and rebel groups is linked to conflict geography. Governments violate physical integrity rights more frequently and kill more civilians the greater the overall amount of territory under contestation. Rebels kill more civilians in highly dispersed insurgencies that lack a clear epicenter.
TL;DR: In this article, the impact of resource dependence on adjusted net savings (ANS) as an indicator of weak sustainability is examined. But the authors focus on the specific role of armed conflict and armed violence as captured by the homicide rate.
Abstract: The dependence on oil, gas, and mineral exports arguably has a negative impact on economic growth in resource-rich, developing countries. This article looks at the impact of resource dependence on adjusted net savings (ANS) as an indicator of weak sustainability. Our results, based on a panel of 104 developing countries during the recent commodity price boom, confirm a negative relationship between resource extraction and sustainable development as measured by ANS. We further look at the specific role of armed conflict and armed violence as captured by the homicide rate. Armed conflict, which is positively associated with resource dependence, negatively affects ANS per capita according to both our OLS and instrumental variables (IV) estimates. Similarly, armed violence has a detrimental effect on sustainable development. Our IV estimate suggests that a one-point increase in the homicide rate decreases ANS per capita by $60. Since education expenditures are a critical ANS component, we further examine the ...
TL;DR: In this paper, the authors examined how workplace goals affect the quality of worker output, using data from the recruiting command of the US Navy, and found significant reductions in the recruitment quality of new recruits towards the end of the contracting month, both in terms of pre-existing quality of recruits and in medium-term outcomes that reflect the quality.
Abstract: This paper examines how workplace goals affect the quality of worker output, using data from the recruiting command of the US Navy. Recruiting stations and recruiters are assigned monthly goals for the quantity of new recruits that may create an unintended incentive to sacrifice quality, especially towards the end of the month. Using data on the universe of Navy recruits from FY1998 to 2010, we find significant reductions in the quality of recruits towards the end of the contracting month, both in terms of pre-existing quality of recruits and in medium-term outcomes that reflect the quality of the job match.
TL;DR: This paper used vector autoregressions to show that Enders, Sandler, and Gaibulloev's previous analysis is accurate on the whole, but that there are important differences between regions.
Abstract: It is generally deemed that domestic and transnational terrorism respond to different types of events. This study updates Enders, Sandler, and Gaibulloev’s previous analysis to include data through the fourth quarter of 2010 and provides analysis of terrorism at the regional level. Vector autoregressions are used to show that previous findings are accurate on the whole, but that there are important differences between regions. Notably, the Granger-causality for the world depends on whether Iraq and Afghanistan are included in the sample, and impulse response functions highlight the persistent effect a shock to transnational terrorism can have on domestic terrorism.
TL;DR: In this article, a growth model for a country under a Hobbesian environment with international conflicts where national defense is the only way to prevent external predation is developed, where different defense strategies result in different growth paths.
Abstract: This paper develops a growth model for a country under a Hobbesian environment with international conflicts where national defense is the only way to prevent external predation. Different defense strategies result in different growth paths. The long-run growth path is determined by the equilibrium of a dynamic game with three players: the external predator, the government, and the family. The equilibrium growth path can have different phases: submissive equilibrium, tolerant equilibrium, and complete protection equilibrium. Sustainable growth will endogenously induce an adjustment of the defense strategies. As the economy keeps growing, complete protection will eventually be preferred. The optimal growth path prefers to compress the length of the transitional period between incomplete protection and complete protection. Some interesting features of the transitional dynamics are exhibited by a control model with discontinuity.
TL;DR: In this article, the authors investigate how regulations on conflict minerals sourced in the Democratic Republic of the Congo were perceived by investors and find that for a subset of mining companies, stock returns were abnormally high when regulations in the US became more likely.
Abstract: Using an event study approach to analyze stock market data from the United States, I investigate how regulations on conflict minerals sourced in the Democratic Republic of the Congo were perceived by investors. I find that for a subset of mining companies, stock returns were abnormally high when regulations in the US became more likely. I also find that returns were higher for communications equipment manufacturing companies when strong regulations in the DRC were announced. I argue that these responses were due to the competitive environments faced by each of these company types. These findings relate to debates surrounding the effects of the conflict mineral regulations. While some critics argue that reporting requirements were tantamount to a ban on minerals from the DRC, I find that stock returns for a subset of companies were sensitive to legislation in the DRC after legislation became law in the US, suggesting that market participants did not expect a complete trade ban on regulated mining and tradi...
TL;DR: The 16th edition of the 16th International Conference on Economics and Security (ICES) was held at the American University in Cairo, Egypt, 21-22 June 2012 as discussed by the authors.
Abstract: This special edition is the product of the 16th Annual International Conference on Economics and Security, held at the American University in Cairo, Egypt, 21–22 June 2012. The conference was organ...
TL;DR: In this paper, the civil war that took place in Greece between the Communist Party and the Centre-Right Government during 1946-1949 is examined from a political economy perspective, and the cost of the conflict is measured as output forgone relative to what it would have prevailed had Greece followed a post-war recovery similar to that of other nations in Western Europe.
Abstract: The Civil War that took place in Greece between the Communist Party and the Centre-Right Government during 1946–1949 is examined from a political economy perspective. The cost of the conflict is measured as output forgone relative to what it would have prevailed had Greece followed a post-war recovery similar to that of other nations in Western Europe. A two-stage approach compares Nazi-occupied countries with neutral ones to assess the cost inflicted by Second World War, and then compares Greece with the former to estimate the impact of the civil conflict. A regional analysis finds that the political discontent was mainly shaped by pre-war socio-economic grievances, rather than being affected by contemporaneous deprivation or driven by class structure as hardliners of both sides preferred to present in pushing for an all-out confrontation. The failure to settle political rivalries and thus prevent the conflict is also discussed.