Does military spending nonlinearly affect economic growth in South Africa?

Phiri, Andrew (2016): Does military spending nonlinearly affect economic growth in South Africa?

Abstract

Using annual data collected from 1988 to 2014, this study provides evidence of a nonlinear relationship between military spending, economic growth and other growth determinants for the South African economy. The empirical study is based on estimates of a logistic smooth transition regression (LSTR) model and our empirical results point to an inverted U-shaped relationship between military spending and economic growth for the data. Furthermore, our empirical results suggest that the current levels of military spending, as a component of total government expenditure, are too high in the South African economy and need to be transferred towards more productive non-military expenditure in order to improve the performance of economic growth and other growth determinants.

• Item Type: MPRA Paper
• Language: English
• Keywords: Military expenditure; Non-military expenditure; Economic growth; Investment; Labour, Exports; South Africa; Sub-Saharan Africa; Developing country; Smooth transition regression (STR) model.
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; H - Public Economics > H5 - National Government Expenditures and Related Policies > H56 - National Security and War; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O40 - General

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