Robert E. Looney

Defense Expenditures, External Public Debt and Growth in Developing Countries

This study reexamines the relationship between growth and defense spending in developing countries. It differs from previous studies as it recognizes differences in the borrowing capacity of each country. We hypothesize that a negative relationship will exist between defense and economic growth in countries which are financially resource constrained, and a positive relationship will exist in countries which are relatively resource unconstrained. A factor and discriminate analysis are used to group countries. The variables chosen for the factor analysis depict a countrys external debt, structural condition, growth, and balance of payments position. Regression equations were estimated for the total sample and each group, with the growth in Gross Domestic Product as the dependent variable. The results confirm the hypothesized positive relationship between defense and growth in the unconstrained group, but was not confirmed for the constrained group. The results suggest the importance of variables such as foreign ex change, net inflows of capital, external debt, and the growth of the public sector in general, on economic growth.

Defense Expenditures and Economic Growth in Developing Countries

Abstract : Studies of the effect that defense spending has had on economic growth in less-developed countries have produced rather mixed results. We contend that this is because these studies have failed to take into account the relative financial constraints faced by individual countries. In an extension of the seminal work by Emile Benoit on defense spending and its effect on economic growth, I we hypothesize that relatively poor countries tend to cut back high-growth development expenditures in favor of maintaining defense programs, while relatively rich countries are much less likely to abandon development expenditures given a constant level of defense preparedness. Thus, we should expect a negative relationship between defense and growth in the poorer countries, but a positive relationship in the richer countries. In this article, we examine the relevant literature, and develop a model of defense and economic growth that explicitly incorporates resource constraints. The results of the cluster analysis that was used to group the sample of countries into a richer and poorer group are presented. Finally, the results of the within-group regressions are presented.

The regional impact of infrastructure investment in Mexico

Looney R. and Frederiksen P. (1981) The regional impact of infrastructure investment in Mexico, Reg. Studies 15, 285–296. Using multiple regression analysis, production functions are estimated for Mexico to examine whether infrastructures impact on GDP differs depending on the type of investment (economic or social overhead capital) or the type of recipient region (intermediate or lagging). This possibility has been suggested by Hansen. The states were grouped by means of cluster analysis. The results tend to confirm the Hansen thesis: economic overhead capital has had its greatest impact on GDP in intermediate regions while social overhead capital has had its greatest impact in lagging regions. A test for causality indicates that investment precedes income growth. Several policy recommendations are offered on the basis of these results.

Internal and External Factors in Effecting Third World Military Expenditures

Recent research on the determinants of Third World military expenditures has indicated that economic variables show great promise in providing a framework as to the underlying causes of Third World defense allocation decisions. Building on this research, we test the hypotheses that the level of military expenditures in developing countries is determined in large part by economic constraints relative to external (threat) factors. In general this hypothesis is borne out with the important qualification that countries without an arms industry appear relatively more affected by external factors than countries with an arms industry. The main implication of the analysis is that a reduction in Third World arms production would most likely result in lower overall levels of military expenditures in these countries.

Infrastructure and private sector investment in Pakistan

Abstract The purpose of this paper is to assess the role played by infrastructure in Pakistans economic expansion. Specifically, analysis is focused on the manner in which the expansion in various types of infrastructural facilities interact with private sector investment, and whether there is a long run equilibrium between infrastructure, private investment, and GDP. The main findings suggest that infrastructures role in this model is not as straightforward as might appear at first. On one level, it appears that in the case of Pakistan the expansion of public infrastructure has played a rather passive role in the countrys development. That is public facilities have largely expanded in response to the needs created by private sector investment in manufacturing, rather than strongly initiating private capital formation. However, from another perspective, because infrastructure has responded to tangible needs created by private sector expansion it has, no doubt, been very effective in alleviating real bottlenecks.

Real or Illusory Growth in an Oil Based Economy: Government Expenditures and Private Sector Investment in Saudi Arabia

Abstract The purpose of this paper is to determine whether and to what extent “Dutch Disease” effects have offset the potentially positive Hirschman-type inducements provided by massive government expenditures intended to stimulate private sector investment in Saudi Arabia. The main finding is that in Saudi Arabia at least infrastructure investment does not appear to have played a strong role in stimulating private sector investment. Instead, the private investors appear to be much more sensitive to shorter run current conditions created by government expenditures.

Excessive defense expenditures and economic stabilization: The case of Pakistan

Toward the end of 1988, Pakistans deteriorating resource situation caused a financial crisis, many remnants of which still exist today. In 1988 the governments budget deficit reached 8.5 percent of Gross Domestic Product (GDP), inflation accelerated, the current account deficit doubled to 4.3 percent of Gross National Product (GNP), the external debt service ratio reached 28 percent of export earnings, and foreign exchange reserves fell in half, to

Defense Expenditures and Economic Performance in South Asia: Tests of Causality and Interdependence

438 million, equal to less than 3 weeks of imports (World Bank, 1991). These developments have eroded the ability of the government to affect the countrys development process. In fact, the encouragement of private-sector activity, particularly investment, is the only viable option open to the authorities. It follows that for policy purposes the most important issue involves restructuring government expenditures and their financing in a manner that would provide the maximum inducement to private-sector capital formation, especially in manufacturing. Operationally, this means finding an optimal balance between the governments three most important budgetary items: defense, public consumption, and infrastructural development. What is more important, because there is abundant evidence 1 that the governments deficits have crowded out a certain amount of private investment, the authorities must achieve this balance within the context of a reduced level of expenditures, tax increases, or both.

Militarization, Military Regimes, and the General Quality of Life in the Third World

INTRODUCTION The growth in world military expenditure is the supreme paradox of our age. While it is reasonable and prudent for a nation to make provision for security against external threats, one nations security is likely to be anothers insecurity. As a result, particularly in an atmosphere of hostility and suspicion, military expenditure assumes a competitive dynamic. The net result is a reduction in security for all nations. The realization that this bizarre process consumes huge quantities of resources with high opportunity cost in terms of the possibility of achieving higher standards of living is only slightly less disquieting (Treddenick, 1985: 77). To date, economists have had relatively little to say about the causes and consequences of arms races, particularly those in the Third World. This neglect is surprising in that arms races have to do with resource allocations in a complex and competitive environment. The purpose of this paper is to add this economic dimension through an examination of the interdependence between arms races and economic allocation in a developing world context. In this regard, India and Pakistan provide an ideal case study because of their interdependence from a geographic, economic, political, and social point of view (Chatterji, 1968: 87). Based on this analysis, several general conclusions follow concerning the causes and costs of the regions long-standing arms race.

Diversification in a small oil exporting economy: The impact of the Dutch disease on Kuwait's industrialization

The purpose of this article is to reexamine the debate concerning the military/civilian regime and socioeconomic performance from the perspective of comparative budgetary processes. Specifically, do budgetary patterns differ between Third World military and civilian governments? If so, do they differ to the extent that military expenditures have a regime-distinctive impact on socioeconomic expenditures and therefore on the quality of life? The main finding is that a consistent set of socioeconomic differences exists between Third World military and civilian regimes. These differences result not only from differences in budgetary priorities but, almost as importantly, from the manner in which governments mobilize resources for military purposes.