https://orcid.org/0000-0001-6230-7292
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ABSTRACT
This study examines the cause-and-effect relationship between military expenditure, security outcome and industrialisation for a panel of 35 African countries spanning from 1990 to 2015. We employed: (i) the Pairwise Dumitrescu-Hurlin panel causality test; and (ii) the newly developed panel VAR in generalised method of moment (GMM) estimation approach was applied to determine what magnitude can future disparities in industrialisation be explained by military expenditure and security outcome. The empirical results suggest the existence of a long-run relationship between military expenditure, security outcome and industrialisation. The causality tests reveal that there is feedback causality between the three variables: Military expenditure promotes security outcome and industrialisation in Africa and vice versa. Thus, an appropriate defense and security sector policies will further contribute to the industrialisation process of Africa.
Notes
1 Benoit, ‘Defense and Economic Growth in Developing Countries’; Benoit, ‘Growth and Defense in Developing Countries’.
2 Inter alia: Dunne, Nikolaidou and Smith, ‘Military Spending, Investment and Economic Growth in Small Industrializing Economies’; Dunne and Smith, ‘Military Expenditure and Granger Causality’; Lin and Ali, ‘Military Spending and Inequality’; Smyth and Narayan, ‘A Panel Data Analysis of the Military Expenditure-External Debt Nexus’; Manamperi, ‘Does Military Expenditure Hinder Economic Growth?’; Saba and Ngepah, ‘Convergence in Military Expenditure and Economic Growth in Africa and its Regional Economic Communities’; Saba, ‘Convergence or Divergence Patterns In Global Defence Spending’; Saba and Ngepah, ‘A Cross-Regional Analysis of Military Expenditure, State Fragility and Economic Growth in Africa’; Saba and Ngepah, ‘Military Expenditure and Economic Growth’.
3 See, Alfaro, ‘Foreign Direct Investment and Growth’; Barrios, Görg and Strobl, ‘Foreign Direct Investment, Competition and Industrial Development in the Host Country’.
4 Feridun, Sawhney and Shahbaz, ‘The Impact of Military Spending on Economic Growth’.
5 Benoit, ‘Growth and Defense in Developing Countries’; DeGrasse, ‘Military Expansion Economic Decline’.
6 UNIDO, ‘Sustaining Employment Growth’.
7 See, Aschauer, ‘Is Public Expenditure Productive’; Barro, ‘Government Spending in a Simple Model of Endogeneous Growth’; Morrison and Schwartz, ‘State Infrastructure and Productive Performance’.
8 Messner, ‘Factionalization and Group Grievance Fuel Rise in Instability’.
9 Cilliers, ‘Africa's Conflict Burden in a Global Context’.
10 Hedden and Cilliers, ‘Parched Prospects-The Emerging Water Crisis in South Africa’.
11 SIPRI, ‘Military expenditure data’.
12 Ibid.
13 Chandra, ‘Industrialization and Development in the Third Word’.
14 UNIDO, ‘Sustaining Employment Growth’; Gui-Diby and Renard, ‘Foreign Direct Investment Inflows and the Industrialization of African countries’.
15 Dunne and Uye, ‘Military Spending and Development’.
16 Coulomb and Bellais, ‘The Marxist Analysis of War and Military Expenditures, Between Certainty and Uncertainty’.
17 Gottheil, ‘Marx versus Marxists on the Role Of Military Production in Capitalist Economies’; Riddle, ‘Marxism and Military Spending’.
18 Leibenstein, ‘Economic Backwardness and Economic Growth’
19 Nelson, ‘A Theory of the Low-Level Equilibrium Trap in Underdeveloped Economies’.
20 Rosenstein-Rodan, ‘Problems of Industrialisation of Eastern and South-Eastern Europe’.
21 Hirschman, ‘Strategy of Economic Development’.
22 Bolaky, ‘The Role of Industrialization in Economic Development’.
23 inter alia: Bjorvatn and Coniglio, ‘Big Push or Big Failure?’; Murphy, Shleifer and Vishny, ‘Industrialization and Big Push’; Rosenstein-Rodan, ‘Problems of Industrialisation of Eastern and South-Eastern Europe’.
24 Murphy, Shleifer and Vishny, ‘Industrialization and Big Push’.
25 Amsden, ‘Asia's Next Giant’; Rodrik, ‘Getting Interventions Right’; Wade, Governing the Market: ; Westphal, ‘Industrialization Meets Globalization’.
26 Di Maio, ‘Industrial Policies in Developing Countries’; Esser et al., ‘Systemic Competitiveness’.
27 Chang, Chen, and Hsu, ‘Agricultural Productivity and Economic Growth.
28 Ortiz, ‘An Economic Growth Model Showing Government Spending With Reference to Colombia and Learning-by-Doing’.
29 Ibid.
30 Barro, ‘Government Spending in a Simple Model of Endogeneous Growth’.
31 Matsuyama, ‘Agricultural Productivity, Comparative Advantage, and Economic Growth’.
32 Ortiz, ‘An Economic Growth Model Showing Government Spending With Reference to Colombia and Learning-by-Doing’.
33 Chang, Chen, and Hsu, ‘Agricultural Productivity and Economic Growth’.
34 Matsuyama, ‘Agricultural Productivity, Comparative Advantage, and Economic Growth’.
35 Kohli, ‘State-Directed Development: Political Power And Industrialization in the Global Periphery’.
36 Nabe, ‘Military Expenditures and Industrialization in Africa’.
37 Samouel and Aram, ‘The Determinants of Industrialization: Empirical Evidence For Africa’.
38 Da Rin and Hellmann, ‘Banks as Catalysts for Industrialization’.
39 Hicks, ‘Automatists, Hawtreyans, and Keynesians’.
40 Ghirmay, ‘Financial Development and Economic Growth in Sub-Saharan African countries’.
41 Liedholm and Mead, ‘Small Enterprises and Economic Development’.
42 Samouel and Aram, ‘The Determinants of Industrialization’.
43 Schumpeter, The Theory of Economic Development.
44 Samouel and Aram, ‘The Determinants of Industrialization’.
45 Hicks, ‘Automatists, Hawtreyans, and Keynesians’.
46 Schumpeter, The Theory of Economic Development.
47 Da Rin and Hellmann, ‘Banks as Catalysts for Industrialization’.
48 Samouel and Aram, ‘The Determinants of Industrialization: Empirical Evidence For Africa’.
49 Aron, ‘Growth and Institutions’.
50 Chu, ‘Vertical Specialization with Heterogeneous Entrepreneurs.’
51 Hansen and Prescott, ‘Malthus to Solow’.
52 Gollin, Parente, and Rogerson, ‘Miracle Economies and Miracle Seeds’.
53 Murphy et al., ‘Industrialization and Big Push’.
54 Smith, The Demand for Military Spending.
55 Saba(b), ‘Military Expenditure and Security Outcome Convergence in Africa’.
56 Ibid.
57 Thompson, ‘Taxation and National Defense’.
58 Smith, An Inquiry into the Nature and Causes of the Wealth Of Nations.
59 Wagner, The Public Economy.
60 Musgrave, Theory of Public Finance’.
61 Saba(a), ‘Security as an Outcome for Promoting Economic Prosperity in the Regional Economic Communities of Africa’.
62 Bassanini, and Scarpetta. ‘The Driving Forces of Economic Growth’.
63 Saba(a), ‘Security as an Outcome for Promoting Economic Prosperity in the Regional Economic Communities of Africa’.
64 This study used the Augmented Dickey-Fuller (ADF) Test using the Levine-Lin-Chu (LLC) method (Levin, Lin and Chin, ‘Unit Root Tests in Panel Data’), the Im-Pesaran-Shin (IPS) method (Im, Pesaran & Shin, ‘Testing for Unit Roots In Heterogeneous Panels’), and the Fisher-PP and Breitung Method (Breitung, ‘The Local Power of Some Unit Root Tests For Panel Data’; Breitung and Das, ‘Panel Unit Root Tests Under Cross-Sectional Dependence’) to check the order of integration and ascertained stationarity level of each of the variables.
65 The Johansen-Fisher Panel Cointegration Test was employed to determine the long-run equilibrium relationship between the variables in the model.
66 This study also applies the panel causality test developed by Dumitrescu and Hurlin, ‘Testing for Granger Non-Causality in Heterogeneous Panels’.
67 Sims, ‘Macroeconomics and Reality’.
68 Saba and Ngepah. ‘Nexus Between Defence Spending, Economic Growth and Development’.
69 Canova and Ciccarelli, ‘Forecasting and Turning Point Predictions in a Bayesian Panel VAR Model’.
70 Abrigo and Love. ‘Estimation of Panel Vector Autoregression in Stata’.
71 The results of the panel unit root tests for the three variables are not reported here for lack of space. The results are available on request from the author.
72 Before performing the Johansen cointegration tests, this study used the Akaike Information Criterion (AIC) and the Schwarz Information Criterion (SIC) to determine the optimum lag length. As a result, the optimum lag length was 2 by using SIC.
73 Dumitrescu and Hurlin, ‘Testing for Granger Non-Causality In Heterogeneous Panels’.
74 Saba and Ngepah, ‘Military Expenditure and Security Outcome Convergence in African Regional Economic Communities’.
Additional information
Notes on contributors
Charles Shaaba Saba
Charles Shaaba Saba, b. 1986, PhD in Economics (University of Johannesburg, South Africa); currently a research fellow at School of Economics University of Johannesburg. Current research interest: Defense and Peace Economics; Public Finance; Development Economics and Transport Economics.
Nicholas Ngepah
Nicholas Ngepah, b. 1975, PhD in Economics (University of Cape Town, South Africa); currently a lecturer and Professor of Economics at School of Economics University of Johannesburg. Current research interest: Development Economics; Energy Economics; Health Economics; Poverty, Inequality and Growth.