South Africa: An Econometric Analysis of Military Spending and Economic Growth

Abstract

There is considerable debate in the literature over the effects of military spending on economic growth in developing economies. Following the early cross country studies, using average values over time and simple correlation techniques, the application of econometric models provided a wide variety of studies, but no clear consensus over the results. What started to become clear was that to understand the dynamics of the relation between military spending and growth it was necessary to focus on relatively homogeneous groups of countries as well as undertaking case studies of individual countries (Dunne, 1996). This chapter provides a contribution to the corpus of case studies by providing an analysis of South Africa, a particularly interesting focus of study because of the nature of its military industrial complex, the characteristics of the economy, and the fact that it has undergone considerable change. In addition, the country has relatively high quality data for a developing economy.