Optimal military spending in the US: A time series analysis

This paper extends previous work on the optimal size of government spending by including nested functional decompositions of military spending into consumption and investment. Post World War II US data are then used to estimate nested non-linear growth models using semi-parametric methods. As expected, investments in military and non-military expenditure are both found to be productive expenditures with respect to the private production. Moreover there is little evidence to suggest that current military spending is having a negative impact on economic growth in the US, while civilian consumption only tends to have only a weak impact. This does not imply that society will necessarily benefit from a reallocation of more spending to the military sector, nor that it is the best way to achieve economic growth.     

Dynamic Costs of the Draft

Abstract. We propose a dynamic general‐equilibrium model with human capital accumulation to evaluate the economic consequences of compulsory services (such as military draft or social work). Our analysis identifies a so far ignored dynamic cost arising from distortions in time allocation over the life cycle. We provide conservative estimates for the excess burden that arises when the government relies on forced labor rather than on income taxation to finance public expenditures. Our results suggest that eliminating the draft could produce considerable dynamic gains, both in terms of GDP and lifetime utility.     

MILITARY SPENDING,THREATS AND STOCHASTIC GROWTH

This paper analyses the impact of home military spending and foreign military threat on economic growth in a stochastic endogenous growth model involving the supply‐side and demand‐side effects produced by military spending. The paper states that an increase in home military spending affects economic growth through three channels, including the crowding‐out effect, the spin‐off effect, and the resource mobilization effect. The net effect which depends on these three channels is ambiguous. Hence, we demonstrate that there exists an optimal defence burden that maximizes the economic growth rate. Furthermore, the optimal defence burden depends on the degree of risk preference. Namely, the optimal defence burden of the risk‐loving agent is more than that of the risk‐neutral agent, and in turn is more than that of the risk‐averse agent. At the same time, we prove that the relationship between the volatility in military spending and economic growth also depends on the degree of risk preference. In addition, we show that greater volatility in foreign military spending leads to a decrease in home aggregate consumption, and hence speeds up economic growth in the home country.     

Does Peacetime Military Service Affect Crime?

Draft lottery data combined with Danish longitudinal administrative records show that military service can reduce criminal activity for youth offenders. For this group, property crime is reduced, and our results indicate that the effect is unlikely to be the result of incapacitation only. We find no effect of military service on violent crime, on educational attainment, or on employment and earnings, either in the short run or in the long run. These results suggest that military service does not upgrade productive human capital directly, but rather affects criminal activity through other channels (e.g., by changing attitudes to criminal activity).     

Military expenditure and economic growth across different groups: A dynamic panel Granger-causality approach

Applying GMM (Arellano and Bond, 1991) to panel data of 90 countries spanning over 1992–2006, this paper explores possible relationships between military expenditure and economic growth. Based on the definitions of income levels by the World Bank – high, middle and low – our results indicate military spending leads negatively economic growth for the panels of low income countries with a marginally significance level of 10%. Of four different regional panels (Africa, Europe, the Middle East–South Asia and Pacific Rim), a negative but stronger (5% significance level) causal relationship from military expenditure to economic growth is found for the Europe and Middle East–South Asia regions.     

Military reserves and social welfare

We consider the contribution of reserves to the efficient mobilization of military manpower. Our analysis suggests that offering recruits an option to serve as reservists enhances social welfare if there is a sufficiently strong relationship between recruit performance in the military and their expected civilian income.     

EU regional policy and tax competition

The European Union (EU) provides coordination and financing of trans-European transport infrastructures, i.e. roads and railways, which link the EU member states and reduce the cost of transport and mobility. This raises the question of whether EU involvement in this area is justified by inefficiencies of national infrastructure policies. Moreover, an often expressed concern is that policies enhancing mobility may boost tax competition. We analyze these questions using a model where countries compete for the location of profitable firms. We show that a coordination of investment in transport cost reducing infrastructures within union countries enhances welfare and mitigates tax competition. In contrast, with regard to union-periphery infrastructure, the union has an interest in a coordinated reduction of investment expenditures. Here, the effects on tax competition are ambiguous. Our results provide a rationale for EU-level regional policy that supports the development of intra-union infrastructure.     

The long-run impact of bombing Vietnam

We investigate the impact of U.S. bombing on later economic development in Vietnam. The Vietnam War featured the most intense bombing campaign in military history and had massive humanitarian costs. We use a unique U.S. military dataset containing bombing intensity at the district level (N = 584) to assess whether the war damage led to persistent local poverty traps. We compare the heavily bombed districts to other districts controlling for district demographic and geographic characteristics, and use an instrumental variable approach exploiting distance to the 17th parallel demilitarized zone. U.S. bombing does not have negative impacts on local poverty rates, consumption levels, infrastructure, literacy or population density through 2002. This finding indicates that even the most intense bombing in human history did not generate local poverty traps in Vietnam.     

Arms production,national defense spending and arms trade: Examining supply and demand

Scholars have estimated demand functions for national defense spending and investigated international arms trade for a long time. The relationship between supply and demand for military goods has, however, only been examined on aggregate level or in formal models yet. I investigate how the supply of military goods by arms-producing companies and the demand for military goods by both the national government and foreign governments are related by using a panel of up to 195 arms-producing companies in 21 countries for the period 2002–2016. The results show that if the demand for national defense spending increases by 1%, the arms sales by a country’s largest arms-producing companies increase by up to 1.2%. If exports of major conventional weapons increase by 1%, sales increase by up to 0.2%. Arms imports do not affect domestic arms sales because imported and domestically produced arms are complements, and countries mainly import those arms they do not produce themselves. Country-specific estimation results suggest that differences among countries in geopolitical conditions and international relations determine whether a country’s arms industry serves economic rather than security purposes.     

The impact of political factors on military base closures

This paper investigates the political economy of military base closure in the United States. The Base Realignment and Closure (BRAC) Act was passed in 1988 in an attempt to insulate base closure and realignment from politic influence. The political pressure to influence the process remains strong, however, given the negative effects base closures can often have on a local economy. Using data from the 2005 BRAC round, we examine whether the current process insulates base closure and realignment from traditional political influences. We find no evidence of political influence on base closings.     

Thailand's Policy Challenges

Thailand's real gross domestic product growth has fallen to a permanently lower trend, making it the worst performer in the Southeastern Asian region. The export sector, the country's long‐standing growth engine, has sputtered due to the declining competitiveness of the manufacturing sector. Chronic political instability during the last two decades has resulted in the adoption of short‐sighted policies, in particular, populist policies designed specifically to garner votes rather than improve the long‐term productivity of the business sector. The military coup was expected to restore political stability and end costly populist policies introduced by elected civil governments. Unfortunately, as the military government develops its long‐term political aspirations, it, too, seeks the assistance of populist policies to ensure its political success. Thailand has promulgated laws and regulations to ensure fiscal discipline, but it has yet to be seen whether the letter of the law can help prevent such populist policies in practice.     

What Drives the Historical Formation and Persistent Development of Territorial States?

The importance of the length of state history for understanding variations in income levels and growth rates across countries has received a lot of attention in the recent literature on long‐run comparative development. The literature, however, is silent about its origins. This paper explores the determinants of statehood by considering the potential roles of an early transition to fully‐fledged agricultural production, the adoption of state‐of‐the‐art military innovations, and the opportunity for economic interaction with the regional economic leader. The results demonstrate that only the association between economic interaction and the rise and development of the state is statistically robust.     

Expropriation risk and competition within the military

How can agents in the military, who control the means of coercion, commit not to expropriate from producers? In this paper we propose competition within the military as one of the mechanisms that can deter predation and consequently create commitment. In our model, even if agents within the military could expropriate all output costlessly, it is attractive to protect producers from predating military units. This marginal defensive advantage and consequently defence is an effective way to potentially eliminate is because there is a other military units, reducing competition and leading to higher future payoffs. Our model predicts that greater internal competition within the military lowers the risk of expropriation and that this effect is strongest for countries with low institutional and economic development. Testing this prediction empirically, we find a robust negative relationship between competition within the military and expropriation risk. In line with our model this effect is strongest for countries at lower stages of institutional and economic development, and it weakens as the latter improve. These results indicate that there may be a short-run component to property rights institutions that varies with the degree of competition among agents who control the means of coercion.     

基于BSC的区域军民融合绩效评估体系构建

军民融合已上升为国家战略,推进军民融合区域层面评估是关系军民融合能否实现的重大问题,也是军地协调发展亟待解决的难题。在国内外尚未有成熟的、可借鉴的军民融合评估模型的情况下,基于BSC等西方绩效评估先进理论,构建一个区域层面的军民融合绩效评估体系,包括三级指标库及BSC战略地图。将军民融合区域战略目标分解为4个维度,即4个一级指标、17个二级指标和62个三级指标,每个维度之间存在层层递进的内部因果逻辑关系,以期为我国军民融合评估发展提供理论指导和政策支持。     

Does geopolitical risk matter for corporate investment decisions? Evidence from cross-border acquisitions

Heightened geopolitical risk has become the new normal. We study the effects of geopolitical risks on cross-border acquisition activity. Using military alliance to proxy for the degree of geopolitical risks, we find that the formation of military alliance between two countries is associated with greater cross-border acquisition flows. Using the recent North Atlantic Treaty Organization enlargements as identification strategy, we find stronger effects of military alliance, especially with defense pacts. One important channel is that military alliance can substitute for target countries’ institutional quality and minimize extreme geopolitical threats faced by acquirers. We find that countries with poor governance and weaker legal enforcement benefit more from military alliance, especially by receiving inbound acquisitions from major military powers. These findings highlight the role of military alliance in the global market for corporate control by reducing geopolitical risks.     

State interests,military power and international commerce: Some cross‐national evidence

This article argues that the military power and commerce of states moves together in peacetime, and that the nature of this relationship is bound up with peacetime patterns of conflict. After constructing an essentially realist argument for such a relationship, and attempting to present the various ways in which military power and commerce interact, I estimate several cross‐sectional regressions with data from a number of countries. The regressions provide some support for a relationship between military spending and trade, but the connections between military spending and protectionism are not well supported.     

技术差距、军用成果转化率与军事工业研发竞争研究

在军民融合深度发展背景下,需要引导民品企业参与军事工业研发,以改进武器装备长期以来高端供给能力不足的问题。当前情况下,民品企业与军工企业间存在着技术差距,同时军用成果转化率不高造成技术溢出不对称。通过建立博弈模型,分析技术差距和军用成果转化率对军工企业、民品企业研发竞争的影响。结果发现,技术差距和军用成果转化率都不同程度影响民品企业研发意愿,阻碍民品企业参与竞争;军民企业间保持适度的技术差距和提高军用成果转化率可以提升社会研发总效率。此外,促使军工企业和民品企业共同研发,可以使社会研发效率帕累托改进效果更好。     

考虑评估指标关联性的我国军民融合发展水平评估研究

军民融合发展水平评估作为一项复杂的系统工程,其评估指标间不可避免地存在相互依存和影响关系。考虑到评估指标间的相互关联性,运用DEMATEL ANP方法,从军民融合发展的基础、策略、环境3个方面构建我国军民融合发展水平评估指标体系,并对指标权重进行分析,在此基础上,利用灰色关联分析法对我国军民融合发展水平进行实证评估。研究发现,物质条件是推进我国军民融合发展的重要基础,军民融合的重点在国防科技和武器装备领域,二者军民深度融合发展的着力点在企业,而企业内组织结构和人员配置对军民融合的适应性是其军民融合式发展的关键;当前我国军民融合发展水平整体上初步迈入中等级别,但不同领域的发展水平存在一定差异。     

Does development aid increase military expenditure?

Using a new instrumental variable strategy, we examine whether bilateral development aid increases military expenditure in recipient countries. The instrument is the interaction of donor government fractionalization and the probability of receiving aid. The dataset includes new data on military expenditure for 124 recipient countries over the 1975–2012 period. When accounting for outliers, our results do not suggest that development aid affects military expenditure in the full sample. However, the effect of aid on military expenditure varies across characteristics of recipient and donor countries, even after excluding outliers. First, aid increases military expenditure in countries that depend on aid and are prone to conflicts. Second, aid provided by coordinated market economies increases military expenditure.