Defence spending and growth in Greece: a comment and further empirical evidence

Abstract

This note critically evaluates the theoretical framework and empirical results of Chletsos and Kollias (1995) on the relationship between defence expenditure and economic growth in Greece, and re-examines the issue on the basis of an alternative model. It is argued that the reviewed paper does not provide a formal rationalization for the incorporation of military spending in a sources of growth equation, and it does not make use of the entire set of available data, leading thus to questionable and inconclusive empirical results. The specification of an alternative model within the neoclassical production-function framework and its estimation over the period 1958-91 shows that military expenditure has been detrimental to economic growth in Greece, contrary to Chletsos and Kollias' findings.