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The peace dividend : military spending cuts and economic growth, Volume 1
 
Author:Knight, Malcolm; Loayza, Norman; Villanueva, Delano; Collection Title:Policy, Research working paper ; no. WPS 1577
Date Stored:2003/07/30Document Date:1996/02/29
Document Type:Policy Research Working PaperSubTopics:Environmental Economics & Policies; Achieving Shared Growth; Economic Theory & Research; Legal Products; Peace & Peacekeeping; Inequality; Decentralization
Language:EnglishMajor Sector:(Historic)Economic Policy
Report Number:WPS1577Sub Sectors:(Historic)Macro/non-trade
Volume No:1  

Summary: Conventional wisdom suggests that reducing military spending may improve a country's economic growth, but empirical studies have produced ambiguous results on this point. Extending a standard growth model, the authors exploit both cross-section and time-series dimensions of available data to get consistent estimates of the growth-retarding effects of military spending. Military spending is growth-retarding because of its adverse impact on capital formation and resource allocation. Model simulation results suggest a substantial long-term peace dividend - in the form of higher capacity output per capita - that may result from: 1) markedly lower military spending in most regions in the late 1980s; and 2) future cuts in military spending if global peace is secured.

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