Growth, Political Instability and the Defence Burden

URL:

http://links.jstor.org/sici?sici=0013-0427%28199611%292%3A63%3A252%3C649%3AGPIATD%3E2.0.CO%3B2-Y

Abstract:

I develop and test a model to examine the economic effects of political instability and military expenditure. Defence plays three important roles in the model: (i) it provides insurance against political instability; (ii) it augments the human capital stock by training the labour force; but (iii) it comes at the expense of consumption. The resulting theory predicts that increased political instability or increased defence can inhibit economic growth. Using panel data, I find that increases in political instability do decrease growth while increases in defence do decrease political instability. I also find that increases in defence have a direct negative effect on growth, although the relation is weak.

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