Financial Economics

Authors

  • Collective Authors

Abstract

The purpose of the paper is to use econometric methods to ascertain the main determinants
of rising military expenditure in BRICS countries for the period of 1970 to 2017.The empirical result
of the determinant for military expenditure of BRICS countries from 1970 to 2017 employed the panel
data analysis approach. Based on the detailed theoretical and empirical literature on determinant for
military expenditure, the neoclassical model was considered the best to analyzed determinant of BRICS
countries military expenditure. BRICS countries political economy and security factors were
incorporate for model specification. The determinant for military expenditure for BRICS include
income, population, government expenditure, Security web (average military expenditure of
neighboring countries within BRICS countries), internal threats and external threats. The economic,
political and security factors are included. The empirical result suggest that BRICS countries military
expenditure is mainly determined by its income, population, exchange rate, internal threats, inflation
and political regime (proxy by democracy index). In conclusion, the result reveal that BRICS policy
makers if they are interested in reversing their high unemployment and poverty rate should focus their
attention on these encouraging the local production of their arms/ammunition (military industries)
which will create job opportunities for their teeming youthful population. This result is in line with the
findings of (Tambudzai, 2011), (Brauer, 2002) and Hartley and (Sandler & Hartley, 1995).

References

Aziz, N.; Aziz, N.; Asadullah, M.N. & Asadullah, M.N. (2017). Military spending, armed conflict and
economic growth in developing countries in the post-Cold War era. Journal of Economic Studies, 44(1),
pp. 47-68.
Ball, N. (1983). Defense and development: A critique of the Benoit study. Economic Development and
Cultural Change, 31(3), pp. 507-524.
Barro, R.J. & Sala-I-Martin, X. (1992). Public Finance in Models of Economic Growth. The Review of
Economic Studies, 59(4), pp. 645-661.
Batchelor, P.; Dunne, J.P. & Saal, D.S. (2000). Military spending and economic growth in South Africa.
Defence and peace economics, 11(4), pp. 553-571.
Brauer, J. (2002). Survey and review of the defense economics literature on Greece and Turkey: what
have we learned? Defence and Peace Economics, 13(2), pp. 85-107.
Collier, P. (2003). Breaking the conflict trap: Civil war and development policy. World Bank
Publications.
Collier, P. & Hoeffler, A. (2002). Military expenditure: Threats, aid, and arms races. The World Bank.
Deger, S. & Sen, S. (1990) Military security and the economy: defence expenditure in India and
Pakistan. The economics of defence spending, pp. 189-227.
Dommen, E. & Maizels, A. (1988). The military burden in developing countries. The Journal of Modern
African Studies, 26(3), pp. 377-401.
Dunne, J.P. & Mohammed, N.A. (1995). Military spending in sub-saharan africa: Some evidence for
1967-85. Journal of Peace research, 32(3), pp. 331-343.
Dunne, J.P.; Perlo‐Freeman, S. & Smith, R.P. (2008) The demand for military expenditure in
developing countries: hostility versus capability. Defence and Peace Economics, 19(4), pp. 293-302.
Dunne, P. & Perlo-Freeman, S. (2003) The demand for military spending in developing countries.
International Review of Applied Economics, 17(1), pp. 23-48.
Gujarati, D.N. (2009). Basic econometrics. Tata McGraw-Hill Education.
Hewitt, D. & Van Rijckeghem, C. (1995). Wage expenditures of central governments.
Hewitt, M.D.P. (1991). Military expenditure: econometric testing of economic and political influences.
International Monetary Fund.
Hou, N. (2010) Arms race, military expenditure and economic growth in India. University of
Birmingham.
Looney, R.E. (1989) Internal and external factors in effecting Third World military expenditures.
Journal of Peace Research, 26(1), pp. 33-46.
Posen, B. (1986). The sources of military doctrine: France, Britain, and Germany between the world
wars. Cornell University Press.
Rosh, R.M. (1988). Third world militarization: Security webs and the states they ensnare. Journal of
Conflict Resolution, 32(4), pp. 671-698.
Sandler, T. & Hartley, K. (1995). The economics of defense. Cambridge University Press.
Smith, R. (1995). The demand for military expenditure. Handbook of defense economics, 1, pp. 69-87.
Smith, R.P. (1980). Military expenditure and investment in OECD countries, 1954–1973. Journal of
comparative economics, 4(1), pp. 19-32.
Sun, Q. & Yu, Q. (1999). Determinants of China's military expenditures: 1965-93. Journal of Peace
Research, 36(1), pp. 23-33.
Tambudzai, Z. (2011). Determinants of military expenditure in Zimbabwe. The Economics of Peace
and Security Journal, 6(2).
Yildirim, J.; Sezgin, S. & Öcal, N. (2005). Military expenditure and economic growth in Middle Eastern
countries: a dynamic panel data analysis. Defence and Peace Economics, 16(4), pp. 283-295.
Yu, M. (2002). The Impact of US-China Relations on Taiwan’s Military Spending: An analytical Model
of error Correction Mechanism (1966-1992), CGOTS, APSA’s annual meeting in Boston.

Downloads

Published

2021-07-01

Issue

Section

Articles