Lisa M. Grobar

Benoit Revisited: Defense Spending and Economic Growth in LDCs

In the early 1970s, Emile Benoit shocked development economists by presenting positive cross-country correlations between military expenditure rates and economic growth rates in less developed countries (LDCs). This article reviews the long debate that has followed. While the studies surveyed here differ widely in method and focus, the empirical results point to similar conclusions. First, efforts at re-estimating Benoits correlation coefficients for different samples and different time periods all fail to reproduce Benoits results. Second, while some studies uncover evidence of positive effects of military spending through human capital formation and technological “spin-off” effects, models that allow military spending to affect growth through multiple channels find that, while military spending may stimulate growth through some channels, it retards it through others, and the net effect is negative. The most important negative effect is that higher military spending reduces national saving rates, thereby reducing rates of capital accumulation. The existence of positive effects of military spending on economic growth, as conjectured by Benoit, still cannot be ruled out. However, the recent econometric evidence points to the conclusion that these positive effects, if they exist, are small relative to the negative effects, and that, overall, military spending has a weak but adverse impact on economic growth in developing countries.

The effect of real exchange rate uncertainty on LDC manufactured exports

Abstract This paper uses pooled time-series cross-sectional data to conduct an empirical investigation of the relationship between real exchange rate uncertainty and the manufactured exports of developing countries. Export supply equations for four categories of manufactures are estimated using pooled data for ten countries over the period 1963–1985. Evidence is found that some categories of LDC manufactured exports are negatively affected by real exchange rate uncertainty.

The Economic Effects of the Sri Lankan Civil War

A number of studies have used multicountry data sets to analyze the effect of higher military spending on growth in developing countries. E. Benoits controversial 1973 study used a multicountry data set to provide evidence that military spending was positively associated with growth in LDCs.1 Later studies using multicountry data sets, such as those by D. Lim, S. Deger, S. Chan, and R. Faini, P. Annez, and L. Taylor found evidence that military spending depresses growth in LDCs.2 While multicountry data sets are useful, the effect that higher military spending has on growth does vary substantially among countries, depending on specific policy choices made regarding resource allocation. For this reason, it is also beneficial to use a case study approach in analyzing the relationship between defense spending and economic growth in LDCs. This article provides such a case study. It focuses on the small nation of Sri Lanka, which has recently seen a dramatic increase in its defense spending due to a violent civil war that began in 1983. This study analyzes the economic effects of the Sri Lankan civil war, and the potential future costs that could be associated with a continuation of this conflict.

The economic effects of international trade in armaments in the major western industrialized and developing countries

We have used the Michigan Model of World Production and Trade to assess the impact of exports and imports of armaments (based on 1980 data) on sectoral trade and employment and other economic variables in the major Western trading countries. If the United States were to place a unilateral embargo on its arms exports and imports, we calculate that it would experience a comparatively small amount of employment displacement in the aggregate and that most of this displacement would occur in the transport equipment and electric machinery sectors. If all the major Western countries were to place a multilateral embargo on their arms trade, the sectoral effects on the United States would be similarly small. But the sectoral effects in several other industrialized and developing countries measured as a percentage of sectoral employment, would be larger, indicating potential short‐run adjustment problems in labor markets in some cases.

A Data Set on International Trade in Armaments for the Major Western Industrialized and Developing Countries for 1980: Sources and Methodological Issues

ZusammenfassungEine Datensammlung über den internationalen Waffenhandel der bedeutenden westlichen Industrie- und EntwicklungslÄnder im Jahre 1980: Quellen und methodische Fragen. — Dieser Aufsatz liefert eine Sammlung von Daten über den internationalen Waffenhandel nach Herkunfts- und BestimmungslÄndern (-regionen) für die bedeutenden westlichen Industrie- und EntwicklungslÄnder im Jahre 1980. Die Sammlung enthÄlt SchÄtzungen über die Aufteilung des internationalen Waffenhandels nach den vier Sektoren: Kriegsschiffe, MilitÄrflugzeuge, militÄrische Nachrichtenausrüstungen und militÄrische Güter. Sie ist stÄrker disaggregiert als die Quellen, die zur Zeit verfügbar sind, und enthÄlt, wo immer möglich, SchÄtzungen des Umfanges und der Richtung von Waffenlieferungen.RésuméQuelques données sur le commerce international d’armes des principaux pays industriels de l’ouest et des pays en voie de développement en 1980: sources et méthodes. — L’intention de l’étude est de représenter des données sur le commerce international d’armes par pays/région d’origine et de destination parmi les principaux pays industriels de l’ouest et les pays en voie de développement en 1980. Les données contiennent des estimations de la répartition du commerce militaire en quatre secteurs: les navires de guerre, les avions de combat, l’équipement de communication militaire et les biens militaires. Les données sont plus désagrégées que celles qui sont disponibles jusqu’à présent et contiennent, s’il est possible, des estimations du volume et de la direction du commerce international d’armes.ResumenDatos sobre el comercio international de armas de los países occidentales industrializados y en desarrollo más importantes para 1980: fuentes y problemas metodológicos. — El objetivo de nuestro trabajo es presentar datos sobre el comercio internacional de armas segÚn países/regiones de origen y destinatarios correspondientes a los países occidentales industrializados y en desarrollo más importantes para 1980. Estos datos incluyen estimaciones de cuatro sectores de comercio: buques miliares aviones militares, equipo de comunicaciones militares y bienes militares. Nuestros datos son más desagregados que los datos actualmente disponibles de otras fuentes e incluyen, siempre que haya sido posible, estimaciones de la magnitud y directión de los flujos comerciales de armas.

Country survey II: Sri Lanka

This paper provides a survey of the recent economic and military history of Sri Lanka. Sri Lanka, a low‐income country that has historically maintained a low defence burden, has recently increased its military spending substantially due to the high level of domestic violence experienced in the country since 1983. Econometric evidence suggests that the level of defence spending in Sri Lanka is primarily determined by the level of internal threat, real GDP, and external military assistance provided from abroad. Also, analysis of available data indicates that the high military burden to date has been financed mainly by cutbacks in investment programs.

Policies to promote employment and preserve cultural heritage in the handicraft sector

Abstract For many countries around the world, the handicraft sector has served as a means of maintaining and promoting cultural and artistic traditions. It has also been an important source of employment and income. However, the contributions of this sector to total employment and income are not well understood. In this paper, we present data on employment in the handicraft sector in a number of countries in the developing world. We find evidence that this sector employs over 10% of the labor force in many countries, and that further documentation of this employment is needed in order to design policies to maximize opportunities in this sector. We also identify policies that governments can undertake to preserve the cultural heritage embodied in handicrafts and to promote the export of these products. The importance of these policy recommendations is highlighted with the case of Peru, which has faced considerable import competition in the handicraft sector in recent years.