The Economics of Military Spending

2 Economic models of the military expenditure-growth nexus

Introduction

This chapter briefly presents major economic models to explain the effect of milex on economic growth. Assessing the importance of milex to the economy is the core task of defence economics. A key empirical question that has been addressed is whether milex has a positive impact on economic growth mainly by boosting aggregate demand or a negative impact mainly by crowding out public and private investments. Milex influences economic growth in several ways. In the short run, the main effect is substitution between milex and other government expenditure. In the long run, milex influences economic growth through different channels due to its effect on labour, capital, technology ...