The impact of military spending on economic growth

This study investigates the impact of military spending in the United States in the post World War II era. With the increase in military spending during the nuclear age on procurements and research and development, economists have shown growing concerns about how these types of expenditures affect the performance of the economy.;The results of earlier works in this area were inconclusive and provided no general consensus about the impact of military spending on growth. The present paper, using the results of the earlier studies, begins by constructing a comprehensive growth model and attempts to analyze the subject by way of relating military outlays to a multitude of growth-causing variables.;A unique feature of the present study is that the military outlays, the subject matter of our analysis, are disaggregated into specific categories of (a) manpower and operations, (b) procurements, (c) research and development (R&D), and (d) education. Furthermore, in analyzing each of these component variables, special efforts were made for correct specification of the lag structure in our estimating equation.;Three of the categories of the military outlays for all the different time lags included in the analysis were found to have statistically significant bearings on the growth performance of the economy. Military manpower and operations had the strongest and most immediate positive impact while the impact of the other components was spread out over time. Military procurements exert short-term effects that are initially negative but reversing to a less potently positive impact before fizzling out within the fourth year of appropriation. Military R&D activities, our study indicates, exhibit both a short-term and long-term positive impact on growth.;As for military education spending, no statistically meaningful relationship was noted, presumably due to the small relative size of this component. Considering, however, that much of the spending in this category was for higher education of veterans, the assumption of a positive growth effect would be in order.