Military Spending, Economic Growth, and the Time Factor

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Abstract
Few empirical analyses of the relationship between military expenditures and economic performance in less-developed countries include the time factor. It has not yet been determined how long, or how many years, it takes for military spending to have an effect on economic growth or whether the nature of the relationship changes as the time lengthens. In this study the time factor is incorporated into the analyses by examining the relationship between expenditures and growth and by successively changing the number of years between the two variables. Two-wave panel regression models are employed that accommodate the analysis of relationships over time by measuring the dependent variable at two points in time while controlling for its initial level. The longitudinal analyses indicate that as the number of years between military expenditures and economic growth increase, the relationship, although null in the short run, is positive in the long run. That is, over time, an increase in military expenditures is related to an upturn in economic growth. This finding both supports previous research and provides additional information about the relationship. It is suggested that time is a critical factor when studying macrostructures and economic systems. At the national level it is necessary to allow for sufficient time for a chain of events to occur in order to discern both shortand long-term effects.

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