Defense Expenditures, External Public Debt and Growth in Developing Countries
Abstract
This study reexamines the relationship between growth and defense spending in developing countries. It
differs from previous studies as it recognizes differences in the borrowing capacity of each country. We
hypothesize that a negative relationship will exist between defense and economic growth in countries
which are financially resource constrained, and a positive relationship will exist in countries which are
relatively resource unconstrained. A factor and discriminate analysis are used to group countries. The
variables chosen for the factor analysis depict a country's external debt, structural condition, growth,
and balance of payments position. Regression equations were estimated for the total sample and each
group, with the growth in Gross Domestic Product as the dependent variable. The results confirm the
hypothesized positive relationship between defense and growth in the unconstrained group, but was not
confirmed for the constrained group. The results suggest the importance of variables such as foreign exchange,
net inflows of capital, external debt, and the growth of the public sector in general, on economic
growth.
Description
Journal of Peace Research, vol. 23, no.4, 1986.
Refereed Journal Article
Rights
This publication is a work of the U.S. Government as defined in Title 17, United States Code, Section 101. Copyright protection is not available for this work in the United States.Collections
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