A Note on Defense Budgets and Economic Growth: Developing Countries in the 1980s

Abstract

This paper examines how investment, the military burden, and military expenditures as a share of the central government budget have affected economic growth for a sample of developing countries in the 1980s. Factor analysis and discriminant analysis are used to separate the countries into two samples. The model which we estimate indicates that defense expenditures differ among groups of countries as to how these expenditures affect growth. In the group of countries which are relatively militarized, growth is independent of the defense burden. For the low militarized group it appears that the higher the defense burden the higher the growth. For a few countries within this group, increased shares of the central budget allocated to defense seems to spur growth.