Military expenditure,threats, and growth

In this study we test whether catching up, the hypothesis that there is technological spillover from leaders to followers, is still important among industrialized countries. Since the USA is no longer the technological leader in many industries and since catching up, if it still exists, may not operate uniformly across different industries, a disaggregated study is more appropriate. A testable model is developed and a number of tests for the existence of catching up are performed. A major improvement on previous tests is that the level of technology is measured in terms of total factor productivity. The two major conclusions, which are quite robust, are that after 1970 there is no catching-up effect left in the tradables sector, while catching up is found for industries in the nontradables sector.