Military Spending and Economic Growth: A Post-Keynesian Model
DOI:
https://doi.org/10.15355/epsj.18.2.51Keywords:
Post-Keynesian, Neo-Kaleckian growth, Joan Robinson, military expenditure, income distribution, growthAbstract
One important criticism of models of military spending and growth is that they focus on the direct impact, ignoring critical indirect impacts through, for example, income distribution. This article introduces a post-Keynesian model incorporating military spending that allows workers and capitalists to have different marginal propensities to consume. The model suggests first that civilian spending is more likely to increase the productive capacity of the economy due to higher human capital and, second, that military spending and civilian spending will have different effects on the profit share and the wage share.
References
Alexander, W. R. J., 2015. The Keynesian IS-MR Model and Military Spending. Defence and Peace Economics, 26(2), pp. 213–221.
https://doi.org/10.1080/10242694.2013.857449
Ali, H. E., 2007. Military Expenditures and Inequality: Empirical Evidence from Global Data. Defence and Peace Economics, 18(6), pp. 519–535.
https://doi.org/10.1080/10242690701331501
Ali, H. E., 2012. Military Expenditures and Inequality in the Middle East and North Africa: Panel Analysis. Defence and Peace Economics, 23(6), pp. 575–589.
https://doi.org/10.1080/10242694.2012.663578
Atesoglu, H. S., 2002. Defence spending promotes aggregate output in the United States. Defence and Peace Economics, 13(1), pp. 55–60.
https://doi.org/10.1080/10242690210963
Becker, J. and Dunne, J.P., 2021. Military Spending Composition and Economic Growth. Defence and Peace Economics, 34(3), pp. 259–271.
https://doi.org/10.1080/10242694.2021.2003530
Bhaduri, A. and Marglin, S., 1990. Unemployment and the real wage: The economic basis for contesting political ideologies. Cambridge Journal of Economics, 14(4), pp. 375–393.
https://doi.org/10.1093/oxfordjournals.cje.a035141
Biscione, A., and Caruso, R., 2021. Military Expenditures and Income Inequality Evidence from a Panel of Transition Countries (1990–2015). Defence and Peace Economics, 32(1), pp. 46–67.
https://doi.org/10.1080/10242694.2019.1661218
Biswas, B. and Ram, R. 1986. Military expenditures and economic growth in less developed countries: An augmented model and further evidence. Economic Development and Cultural Change, 34(2), pp. 361–372.
https://doi.org/10.1086/451533
Blecker, R., 2016. Wage-Led versus Profit-Led demand Regimes: The Long and the Short of It. Review of Keynesian Economics, 4(4), pp. 373–390.
https://doi.org/10.4337/roke.2016.04.02
Blecker, R., 1989. International Competition, Income Distribution and Economic Growth. Cambridge Journal of Economics, 13(3), pp. 395–412.
Caruso, R. and Di Domizio, M., 2017. Military Spending and Budget Deficits: The Impact of US Military Spending on Public Debt in Europe (1988–2013). Defence and Peace Economics, 28(5), pp. 534–549.
https://doi.org/10.1080/10242694.2016.1228259
d’Agostino, G., Dunne, J.P., Lorusso, M. and Pieroni, L., 2020. Military Spending, Corruption, Persistence and Long Run Growth, Defence and Peace Economics, 31(4), pp. 423–433.
https://doi.org/10.1080/10242694.2020.1751503
Deger, S., 1986. Economic development and defense expenditure. Economic Development and Cultural Change, 35(1), pp. 179–196.
https://doi.org/10.1086/451577
Deger, S. and Smith, R., 1983. Military expenditure and growth in less developed countries. The Journal of Conflict Resolution, 27(2), pp. 335–353.
https://doi.org/10.1177/0022002783027002006
Dunne, P. and Coulomb, F., 2008. “Peace, war and international security: economic theories” Fontanel, J. and Chatterji, M. (Ed.) War, Peace and Security (Contributions to Conflict Management, Peace Economics and Development, Vol. 6), Emerald Group Publishing Limited, Bingley, pp. 13–36.
https://doi.org/10.1016/S1572-8323(08)06002-5
Dunne, J. P., Nikolaidou, E. and Chiminya, A., 2019. Military Spending, Conflict and External Debt in Sub-Saharan Africa. Defence and Peace Economics 30(4), pp. 462–473.
https://doi.org/10.1080/10242694.2018.1556996
Dunne, P., Smith, R. and Willenbockel, D., 2005. Models of military expenditure and growth: A critical review. Defence and Peace Economics, 16(6), pp. 449–461.
https://doi.org/10.1080/10242690500167791
Elveren, A.Y., 2012. Military Spending and Income Inequality: Evidence on Cointegration and Causality for Turkey,1963–2007. Defence and Peace Economics, 23(3), pp. 289–301.
https://doi.org/10.1080/10242694.2011.578414
Elveren, A.Y., 2019. The Economics of Military Spending: A Marxist Perspective. New York and London: Routledge.
https://doi.org/10.4324/9780429430947
Elveren, A.Y., 2022. Military Spending and Profit Rate: A Circuit of Capital Model with a Military Sector. Defence and Peace Economics, 33(1), pp. 59–76.
https://doi.org/10.1080/10242694.2020.1832394
Elveren, A.Y. 2023. Militarization, Gender Inequality, and Growth: A Feminist-Kaleckian Model. Journal of Post Keynesian Economics, https://doi.org/10.1080/01603477.2023.2201823
https://doi.org/10.1080/01603477.2023.2201823
Feder, G., 1983. On Exports and Economic Growth. Journal of Development Economics, 12(1–2), pp. 59–73.
https://doi.org/10.1016/0304-3878(83)90031-7
Hayo, B. and Nuemeier, F., 2017. The (In)validity of the Ricardian equivalence theorem–findings from a representative German population survey. Journal of Macroeconomics, 51, pp. 162–174.
https://doi.org/10.1016/j.jmacro.2017.01.003
Kalecki, M., 1954. Theory of Economic Dynamics. London: George Allen and Unwin.
Knight, M., Loayza, N. and Villanueva, D., 1996. The peace dividend: Military spending cuts and economic growth. IMF Staff Papers, No. 1577.
https://doi.org/10.2139/ssrn.883201
Lavoie, M., 2006. Introduction to Post-Keynesian Economics. New York: Palgrave Macmillan.
https://doi.org/10.1057/9780230626300
Lin, E. S., and Ali, H. E., 2009. Military Spending and Inequality: Panel Granger Causality Test. Journal of Peace Research, 46(5), pp. 671–685.
https://doi.org/10.1177/0022343309339247
Meng, B., W. Lucyshyn, and X, Li., 2015. Defense Expenditure and Income Inequality: Evidence on Co-Integration and Causality for China. Defence and Peace Economics, 26(3), pp. 327–339.
https://doi.org/10.1080/10242694.2013.810026
Michael, C., and Stelios, R., 2020. The Effect of Military Spending on Income Inequality: Evidence from NATO Countries. Empirical Economics, 48, pp. 1305–1337.
https://doi.org/10.1007/s00181-018-1576-7
Onaran, Ö., Oyvat, C. and Fotopoulou, E., 2022. A macroeconomic analysis of the effects of gender inequality, wages, and public social infrastructure: the case of the UK. Feminist Economics, 28 (2), pp. 152–188.
https://doi.org/10.1080/13545701.2022.2044498
Oyvat, C., Öztunalı, O. and Elgin, C., 2020. Wage-led versus profit-led demand: A comprehensive empirical analysis. Metroeconomica, 71, pp. 458–486.
https://doi.org/10.1111/meca.12284
Peltier, H. 2021. Arms, Tanks, and Munitions: The Relationship between Profits and Monopoly Conditions. Security in Context Working Paper Series Working Paper #1.
Pempetzoglou, M., 2021. A Literature Survey on Defense Expenditures-External Debt Nexus. Peace Econ. Peace Sci. Pub. Pol. 27(1), pp. 119–141.
https://doi.org/10.1515/peps-2019-0049
Robinson, J., 1956. The accumulation of capital. London: Macmillan
Robinson, J., 1962. Essays in the theory of economic growth. London: Macmillan
https://doi.org/10.1007/978-1-349-00626-7
Shin-Chyang, L., Cheng-Te, L. and Shang-Fen, W., 2016. Military spending and growth: a small open economy stochastic growth model. Defence and Peace Economics, 27(1), pp. 105–116.
https://doi.org/10.1080/10242694.2015.1094881
Smith, R., 1980. Military expenditures and investment in OECD countries, 1954–1973. Journal of Comparative Economics, 41(1), pp. 19–32.
https://doi.org/10.1016/0147-5967(80)90050-5
Stanley, T. D., 1998. New Wine in Old Bottles: A Meta-Analysis of Ricardian Equivalence. Southern Economic Journal, 64(3), pp. 713–727.
https://doi.org/10.1002/j.2325-8012.1998.tb00089.x
Stockhammer, E., 1999. Robinsonian and Kaleckian Growth: An Update Post-Keynesian Growth Theories. Working Paper No. 67.
Stockhammer, E., 2017. Wage-Led versus Profit-Led Demand: What Have We Learned? A Kalecki-Minsky View. Review of Keynesian Economics, 5(1), pp. 25–42.
https://doi.org/10.4337/roke.2017.01.03
Stockhammer, E. and Onaran, Ö., 2022. Growth Models and Post-Keynesian Macroeconomics. Diminishing Returns The New Politics of Growth and Stagnation. pp. 53–73.
https://doi.org/10.1093/oso/9780197607855.003.0002
Töngür, Ü. and Elveren, A. Y., 2016. The impact of military spending and income inequality on economic growth in Turkey. Defence and Peace Economics, 27(3), pp. 433–452.
https://doi.org/10.1080/10242694.2014.925324
Vadlamannati, K. C., 2008. Exploring the Relationship between Military Spending & Income Inequality in South Asia. William Davidson Institute Working Paper No. 918. Ann Arbor, Michigan.
Vaze, P., Thol, C., Fraser, A., Derbyshire, J., and Savic, M., 2017. Exploring the Value of Defence Jobs in the UK. Department for Business, Energy and Industrial Strategy, UK.
Wolde-Rufael, Y. W., 2016a. Defence Spending and Income Inequality in Taiwan. Defence and Peace Economics, 27(6), pp. 871–884.
https://doi.org/10.1080/10242694.2014.886436
Wolde-Rufael, Y. W., 2016b. Military Expenditure and Income Distribution in South Korea. Defence and Peace Economics, 27(4), pp. 571–581.
