Do Military Expenditures Boost Profit Rates?

Elveren, Adem Yavuz and Dunning, Rachel (2017): Do Military Expenditures Boost Profit Rates?

Abstract

Understanding the effect of military expenditures on profit rates can provide important insights on the use of government spending. We utilize the panel dynamic ordinary least square method to examine that relationship for 32 major countries from the period of 1963-2008. We find that while military expenditures increase profit rates in arm-exporting countries, the opposite occurs in the case of arms-importing countries.

• Item Type: MPRA Paper
• Language: English
• Keywords: Military expenditures, profit rates, panel data
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C33 - Panel Data Models ; Spatio-temporal Models; E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models > E11 - Marxian ; Sraffian ; Kaleckian; H - Public Economics > H5 - National Government Expenditures and Related Policies > H50 - General

References

Alptekin, Aynur, Paul Levine. 2012. “Military expenditure and economic growth: a meta-analysis.” European Journal of Political Economy 28 (4), 636–650. https://doi.org/10.1016/j.ejpoleco.2012.07.002

Dunne, J. Paul. 1996. “Economic effects of military spending in developing countries.” In The Peace Dividend, edited by N. P. Gleditsch, A. Cappelen, O. Bjerkholt, R. Smith, P. Dunne, 439–464. Amsterdam, North Holland.

Dunne, J. Paul, Mehmet Uye. 2010. “Military Spending and Development”. Chap.10 in The Global Arms Trade, edited by Andrew Tan, Europa, Routledge.

Dunne, J. Paul, L. Pieroni, G. d’Agostino. 2013. “Military Spending and the Falling Rate of Profit in the US.” available at http://www.sipri.org/research/armaments/milex/ICES2013/papers/archive/dunne-pieroni-agostino-milex-falling-rate-of-profit-in-usa last accessed on January 2015.

Dumitrescu, Elena-Ivona, Cristophe Hurlin. 2012. “Testing for Granger Non-causality in Heterogeneous Panels.” Economic Modeling 29 (4), 1450-1460. https://doi.org/10.1016/j.econmod.2012.02.014

Elveren, Adem Yavuz, Sara Hsu. 2016. “Military Expenditures and Profit Rates: Evidence from OECD Countries.” Metroeconomica 67 (3), 551-577. DOI: 10.1111/meca.12111

Elveren, Adem Yavuz, Gökçer Özgür. Forthcoming. “The Effect of Military Expenditures on the Profit Rates in Turkey.”

Georgiou, George M. 1992. “Military Expenditure and the Rate of Profit: Some Empirical Results.” International Review of Applied Economics 16 (3), 344-361. http://dx.doi.org/10.1080/758534266

Herzer, Dierk, Sebastian Vollmer. 2012. “Inequality and growth: evidence from panel cointegration.” Journal of Economic Inequality 10 (4), 489–503 DOI 10.1007/s10888-011-9171-6

Kao, Chihwa. 1999. “Spurious Regression and Residual-Based Tests for Cointegration in Panel Data.” Journal of Econometrics 90 (1), 1- 44. https://doi.org/10.1016/S0304-4076(98)00023-2

Kollias. Christos, Thanasis Maniatis. 2003. “Military expenditure and the profit rate in Greece.” Defence and Peace Economics 14 (2), 117-127. http://dx.doi.org/10.1080/10242690302920

Mark, Nelson C., Donggyu Sul. 2003. “Cointegration Vector Estimation by Panel DOLS and Long-run Money Demand.” Oxford Bulletin of Economics and Statistics 65 (5), 655–680. DOI: 10.1111/j.1468-0084.2003.00066.x

Pedroni, Peter. 1999. “Critical values for cointegration tests in heterogeneous panels with multiple regressors.” Oxford Bulletin of Economics and Statistics 61 (S1), 653–670 DOI: 10.1111/1468-0084.0610s1653

Pedroni, Peter. 2004. “Panel Cointegration: Asymptotic and Finite Sample Properties of Pooled Time Series Tests with an Application to the PPP Hypothesis.” Econometric Theory 20 (3), 597–625. DOI:https://doi.org/10.1017/S0266466604203073

Pesaran, M. Hashem. 2007. “A simple panel unit root test in the presence of cross-section dependence.” Journal of Applied Econometrics 22 (2), 265–312. DOI: 10.1002/jae.951

Ram, Rati. 1995. “Defense expenditure and economic growth.” In Handbook of Defense Economics, edited by Keith Hartley and Todd Sandler, 251–273. Amsterdam, Elsevier.

Smith, Ron. 2000. “Defence expenditure and economic growth.” In Making Peace Pay: A Bibliography on Disarmament and Conversion, edited by N. P. Gleditsch, G. Lindgren, N. Mouhleb, S. Smith, I. D. Soysa, 15–24. Claremont, Regina Books.

SIPRI (Stockholm International Peace Research Institute) 2017. www.sipri.org