The Effect of Defense Expenditure on Economic Growth in the Sub-Saharan African Countries: Panel Data Evidence
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Date
2007-07
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Addis Ababa University
Abstract
This paper is a contribution to the debate on the nexus between defense burden and
economic growth in less-developed countries. It also aims to identify the determinants of
defense burden. The study is based on 38 Sub-Saharan African countries over the period
1983-2002. Based on the Hausman (1978) test, random effect estimator model is selected
and employed in the analysis. The empirical result shows that defense burden is
destructive to real GDP growth. At sectoral level, its marginal effect on the value added
growth of manufacturing and agriculture is significant and negative. These negative
effects are especially high in the low income countries. Thus it is necessary to reduce the
excessive and unproductive defense expenditure in the region to promote sustainable
economic growth and to reduce the persistent poverty.
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Keywords
Economic Growth