Defense Expenditures and Economic Growth in Developing Countries

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Abstract
Studies on the effect of defense spending on economic growth in less developed countries have produced mixed results. This study hypothesizes a negative relationship between defense spending and growth in poor counties, and a positive relationship in rich countries. It examines the available literature, developing a model of defense and economic growth, based largely on a previous study by Benoit. A cluster analysis of nine variables was used to group 37 countries. Linear regression revealed that defense expenditures in countries that are relatively resource unconstrained play a positive role in increasing growth, while countries suffering from a lack of foreign exchange and government revenues experience the reverse.

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