W. Robert J. Alexander

The impact of defence spending on economic growth∗ : A multi‐sectoral approach to defence spending and economic growth with evidence from developed economies

There is much controversy in the literature over whether military spending has a positive or a negative impact on economic growth. Some previous approaches in this area omit relevant variables, while others are not soundly based on theory, but rather on an ad hoc justification of their chosen explanatory variables. This paper models the effect of military spending on economic growth by specifying four sectoral production functions. This approach allows for the generation of externality effects by some sectors on others, as well as the possibility of inter‐sectoral productivity differentials. The model is confronted with data from a group of developed countries. It is concluded that the gross effect of military spending on growth is neither significantly positive nor negative, although the defence sector is substantially less productive than the “rest” of the economy.

Defence spending: Burden or growth-promoting?

The sectoral production function model of Feder (1983) has been widely used to examine the link between defence spending and economic growth. In this paper, the model, for which too much has been claimed in some past work, is examined, and the case is made for using growth in real non‐defence output rather than growth in real aggregate output (inclusive of military spending) as the dependent variable. Attention is restricted to a small group of OECD countries for which reliable labour force and capital stock (as well as defence) data are obtainable. With non‐defence output as the dependent variable and using only high quality data, no evidence in favour of the underconsumptionist (as opposed to the defence as a burden) position is found.

THE DEFENCE-DEBT NEXUS: EVIDENCE FROM THE HIGH-INCOME MEMBERS OF NATO

The literature in defence economics has tended to focus on the relationship between defence spending and economic growth. Studies examining the linkage between defence spending and government debt have been relatively rare. Given the recent Global Financial Crisis, originating in the developed economies, and the changed international security picture since 9/11, it is timely to reconsider the defence-debt nexus in the rich economies. This study pays particular attention to developing an empirical strategy which is both soundly based on economic theory concerning the evolution of public debt and which uses econometric methods that are welladapted to the dynamic aspects of the relationship. From the standpoint of economic theory, if a government seeks to minimize the distortionary costs of taxation, then taxation will follow a random walk. Unexpected shocks (war and recession) will cause debt. Other idiosyncratic national-level political considerations that affect the evolution of debt can be factored out by the use of a dynamic panel estimation method. Employing the Arellano–Bond dynamic panel model to the data available from members of the Organization for Economic Co-operation and Development and North Atlantic Treaty Organization over the periods 1988–2009 and 1999–2009, this study finds that the defence burden is a statistically significant and economically important determinant of public debt.

Quantifying compliance costs of small businesses in New Zealand

This paper reports on a small‐scale study of the compliance costs of small New Zealand businesses. Participating firms were asked to keep a record of both time spent and expenditure directly incurred over a thirteen‐week period. This differs from previous studies that rely on a firms recall. The results suggest that New Zealand small businesses, on average, spend less time, but a similar amount of money, on compliance than has been indicated in previous studies. A number of firms do perceive compliance to be a major issue, and in some cases this perception prevents firms from expanding.

The Keynesian IS-MR Model and Military Spending

The issue of guns or butter is one of the most fundamental economic questions, yet there is no consensus on a theoretical framework for examining it. Over the last decade, a version of a simple Keynesian macroeconomic model has been applied a number of times to examining the link between defence spending and economic growth in a range of countries. There are reasons for doubting the soundness of this model as a basis for empirical work.

Inference on productivity differentials in multi-sector models of economic growth

Non-zero marginal factor productivity differentials between sectors are a key feature of multi-sector models of economic growth, suggesting the potential for welfare gains through reallocation of resources between sectors. However, in existing studies, inference on the parameter reflecting productivity differentials is inadequate. Reparameterization of hypotheses relating to the productivity differential parameter allows, under the usual assumptions, exact finite-sample inference to be applied. Confidence intervals based on this approach applied to existing published studies suggest that many of the inferences on the potential gains in growth from exploiting inter-sectoral productivity differences are fragile.

The government sector, the export sector and growth

SummaryA three-sector, two-input growth model is developed which potentially allows for the separate identification of government and export sector productivity differentials and externality effects. Using data from a limited sample of OECD countries (which are the only countries for which reliable capital stock data are readily available), we find that the export sector is more productive than the rest of the economy, but that neither an externality effect nor a productivity differential can be detected in the case of the government sector.

MILITARY SPENDING AND ECONOMIC GROWTH IN SOUTH ASIA: COMMENT AND RECONSIDERATION

In a recent paper in this journal, Wijewerra and Webb study the connection between military spending and gross domestic product (GDP) in a group of five South Asian countries, finding a small but statistically significant positive relationship between military spending and GDP. This paper reviews their approach and proposes an alternative which tries to deal with the problems of omitted variables and variable construction. It finds, in contrast, that a higher share of military spending in GDP is associated with lower growth of GDP per capita.

The determinants of banking efficiency in Hong Kong 2004-2014

ABSTRACT The cost efficiency of the Hong Kong Banking sector over the period 2004–2014 is estimated by data envelopment window analysis. A second stage regression analysis finds that bank size and GDP growth are positively associated with efficiency, whereas revenue diversification and inflation are associated with lower efficiency. Stock exchange listing status is associated with lower efficiency but no clear relationship between measures of market structure and efficiency is found.

Ethnic Gaps and Ethnic Ratios

In the December 2000 issue of Political Science Gould argues that the method chosen by Te Puni Kokiri for measuring ethnic ‘gaps’ leads to serious distortion. Gould claims that his alternative, a ratio of percentages, is conceptually superior. It fact, it is not at all clear what such a ‘ratio of ratios’ means, nor are changes in it easy to interpret. 1 Thanks for useful comments or discussion are due to John Gibson, Stuart McDougall and Ian Pool, as well as to an anonymous referee and the editors of this journal. The usual disclaimer applies.