BUDGETARY CONSEQUENCES OF DEFENSE EXPENDITURES IN PAKISTAN - SHORT-RUN IMPACTS AND LONG-RUN ADJUSTMENTS

In the last twenty years, there has been a growing interest in quantif ying the 'guns versus butter' tradeoff facing developing countries. Th is article examines Pakistan's military expenditures between 1073 and 1986 and estimates both a short-run impact model and long-run adjustme nt model to measure how changes in the defense burden, the deficit, an d government debt have affected budget allocations to economic service s programs and administrative/social programs. In addition, we investi gate whether defense budgets have been increased or maintained either at the expense of economic and social programs in general or merely co nfined to one or two specific programs. Military expenditure patterns are analyzed to see whether or not they were responsible for across-th e-board cuts in long-term infrastructure programs. Our analysis indica tes that the deficit, the debt service, and the military burden are of ten interrelated in such a complex manner that the impact of any speci fic program is difficult to predict. In the short run, most infrastruc ture programs increased as the military burden declined. The opposite was generally true for social programs such as social security, welfar e, and housing. Changes in the defense budget appear to have only a tr ansitory effect on the share of government expenditures allocated towa rd infrastructure. The long-run model suggests that social programs ha ve just as high a priority as economic services. When the military bur den increases, the government is willing to take some resources from i nfrastructure programs and lets the deficit grow to finance social pro grams. Our results also suggest a long run pattern of adjustment in so cial programs but not infrastructure programs - a counter-intuitive re sult given Pakistan's severe infrastructure constraints.