Giorgio d'Agostino

Military Spending, Corruption and Economic Growth

The purpose of this paper is to identify the complementary effect of corruption and military sector on economic performance and to test the magnitude of their impact separately. Unlike the method generally used in the economic literature, we estimate a cardinal corruption index expressed as a percentage of GDP per capita through the multiple causes multiple indicators model (MIMIC).The cross-country results show a negative impact of military spending and corruption indicator on economic performance, which are in line with previous findings. However, the negative effect is mitigated by a significant positive, though asymmetric, relationship between these two factors in affecting per capita growth rate.