THE IMPACT OF DEFENSE AND NON-DEFENSE PUBLIC SPENDING ON GROWTH IN ASIA AND LATIN-AMERICA

For a three-sector Feder-Ram framework, we present time-series, cross- sectional estimates for two cohorts, consisting of Asian and Latin Ame rican countries. The estimates indicate that private investment, and d efense and non-defense public spending are growth promoting for altern ative error components representations. For the best error components representation, greater growth enhancement is associated with the two forms of public spending in Asia than in Latin America, while the oppo site comparison characterizes private investment. Although defense is growth promoting, an opportunity cost exists insofar as non-defense sp ending, financed by defense spending, appears to give a small net boos t to growth in Latin America.