MILITARY SPENDING, GOVERNMENT DISARRAY, AND ECONOMIC-GROWTH - A CROSS-COUNTRY EMPIRICAL-ANALYSIS

Recent years have seen a spate of empirical studies that have used cro ss-country regressions to examine a variety of possible determinants o f long-term economic growth. The present study considers an additional , largely overlooked, explanatory variable: military spending. Consist ent with Thompson's (1974) hypothesis that enhanced national defense f osters economic growth by increasing the security of property rights, the military expenditures share of GDP is found to have a statisticall y significant positive impact on the growth rate of per capita GDP. Th is result is obtained for two alternative model specifications, a Barr o-regression and a LISREL variant of that regression. The LISREL varia nt is motivated by Sala-i-Martin's (1994) claim that the impact of gov ernment economic policies jointly, rather than extant government polic ies individually and separately, is ''the phenomenon that really matte rs'' for long-term economic growth.