MODELING THE DEFENSE-GROWTH RELATIONSHIP AROUND THE GLOBE

One of the most important questions stemming from the end of the cold war is how reductions in defense spending will affect economic perform ance. This question has significant policy implications for countries facing public demands for defense cutbacks and countries still maintai ning high levels of military spending for security. However, previous studies on the defense-growth relationship have reported mixed finding s. Thus, this study investigates how the changes in defense burden wil l affect economic growth by testing the economic effects of defense sp ending on growth in 80 countries using a nonlinear defense-growth mode l that includes technological progress. The results reveal that two th irds of the countries under investigation may expect a ''peace dividen d'' due to the negative relationship between defense spending and econ omic growth.