Revisiting the guns vs butter dilemma. Was Spain different in the implementation of public policies? Defence, growth and education

ABSTRACT

Over the past few decades, numerous studies have been conducted on the trade-off between guns and butter, namely defence spending versus social sector expenditure. It is striking that none has examined the situation in Spain. Previous research on other countries has not provided strong and unambiguous evidence of either positive or negative effects for military expenditure on social spending. We test whether government expenditure on defence contributed positively or negatively to education spending in twentieth-century Spain, attempting to identify policy-making processes within a historical framework. The results show both direct and indirect effects and bring to light the negative consequences of military spending on education expenditure, in particular between the second and fifth year after the military expenditure increases.

KEYWORDS:

• Public policies
• welfare spending
• defense outlays
• education spending
• guns vs butter in Spain

Acknowledgements

We would like to thank the referees for their valuable comments.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes on contributors

José Jurado-Sánchez is Associate Professor of Economic History in the Department of Applied & Structural Economics & History, Complutense University of Madrid, Campus of Somosaguas, 28223 Madrid. He is Dr in Economics with the Doctoral Thesis The Financing of the Spanish Royal Household, 1561–1808, that was selected by the International Economic History Association among the best in the world for the 1994–1998 period. He has published in several academic journals, including Defence and Peace Economics, Investigaciones de Historia Económica/Economic History Research, Revista de Historia Económica/Journal of Iberian and Latin American Economic History, and Hacienda Pública Española/Review of Public Economica. Jurado-Sánchez’s research covers a variety of topics in fields such as Transport in Early Modern History, Economic and Social History of Early Modern Madrid, The Financig of the Spanish Royal Household, Luxury consumption during the Eighteenth Century, The Role of the State in the Preindustrial Economy in the Eighteenth Century Spain, and Military Outlays, Economic Growth and Welfare Expenditures (1700–2000).

Juan-Angel Jimenez-Martin is Associate Professor of Econometrics at Complutense University. He previously held positions as Assistant Professor at the European University of Madrid and as a Visiting Scholar at George Washington University. He holds a Ph.D. in Economics from Complutense University. Professor Jimenez-Martin has published in several academic journals, including Journal of Econometrics, International Review in Economics and Finance, Applied Economic, Journal of Economics Surveys, Journal of Forecasting, International Business & Economics Research Journal, Open Economies Review, Journal of Commercial Biotechnology. Professor Jimenez-Martin’s research covers a variety of topics in Econometrics, Finance and International Finance, including exchange rate models, risk premium in exchange rate markets, VaR expected shortfall and systemic risk.

ORCID

José Jurado-Sánchez http://orcid.org/0000-0003-4434-609X

Notes

1 Detailed results from the statistical tests are available on request.

2 When the explanatory variables have no natural metric or scale, one standard deviation shock (0.24%), rather than one-unit shock (1%), is an appropriate way to present the results. Standard deviation is a measure that describes the probability of an event under a normal distribution. The probability of a 1% (4 standard deviations) change in military spending as a proportion of GDP over the analysed period is extraordinarily low. Bear in mind that the average change for this variable during the full period is 0.05%.

3 The following education laws may be cited: Ley Orgánica sobre el Estatuto de los Centros Escolares (LOECE, 1980), Ley de Reforma Universitaria (LRU, 1983), Ley Orgánica del Derecho a la Educación (LODE, 1985), Ley Orgánica de Ordenamiento General del Sistema Educativo (LOGSE), 1990) and Ley Orgánica de Participación, Evaluación y Gobierno de los Centros Docentes (LOPEC, 1995) (Martínez Álvarez, Sánchez Figueroa, and Cortiñas Vázquez 2013).

4 An important issue in empirical work is the identification problem that results from the fact that changes in military and education spending are observed but both are influenced by unobserved variables affecting both simultaneously and so biasing the estimation results.