Alternative models of Greek defence expenditures

Abstract

This paper models and estimates Greek defence spending over the 1950–1989 period. It employs the Stone‐Geary welfare function and estimates levels of defence expenditures by the Engle‐Granger two‐step procedure. The Dickey‐Fuller test regression for cointegration is specified in terms of the significance of additional augmentations. The Deaton‐Muellbauer functional form is then employed and an estimating equation for the expenditure share of defence is derived. This specification is compared with the levels equation through a number of non‐nested tests involving model transformation.

Key Words:

• Greece
• Defence spending
• Stone‐Geary utility function
• Deaton‐Muellbauer functional form
• Cointegration
• Non‐nested tests

Notes

The author gratefully acknowledges useful comments and suggestions by J.C.K. Ash, S.P. Burke, R.P. Smith and two anonymous referees who are not responsible for any remaining shortcomings.