Defence spending and economic growth: a case study of Greece and comparison with Spain and Portugal (1960-1996).

Nikolaidou, Eftychia K. (1999) Defence spending and economic growth: a case study of Greece and comparison with Spain and Portugal (1960-1996). PhD thesis, Middlesex University. [Thesis]

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Abstract

This thesis provides a case study of the economic effects of military expenditure in Greece and a comparison with two other similar countries. Portugal and Spain. Greece provides a particularly valuable focus for empirical investigation since tor many years it has been allocating a relatively high proportion of its national income to defence, much higher than other countries in NATO and EU. It is also situated in a complex geostrategic environment (the Balkans) and has many security concerns. in particular the confrontation with Turkey. At the same time. the Greek economy has gone through periods of high economic growth as well as periods of stagnation and has been the poorest member of the EU for the last two decades. Lick of a
concensus on the economic effects of defence spending as well as the limited amount of research on the issue in newly industrialised economies intrigued the author and led to this research on whether high military expenditure has contributed to this poor economic performance.
In this way the thesis contributes to an ongoing debate in the literature and provides a valuable additional case study. It provides a further contribution by comparing the results of the analysis for Greece with two similar economies, Spain and Portugal, giving insights into the transferability of results across countries. In undertaking this analysis, a systematic empirical approach is taken which employs three different methodologies: a Granger causality analysis, a supply-side analysis and a demand and supply analysis, all enriched with advanced econometric techniques.
Overall, the results for Greece suggest that the high military burden has been harmful to economic performance and has made a significant contribution to- the backwardness of the economy. While the results for Portugal and Spain show some differences, they do not contradict the overall conclusion for Greece. Portugal shows a clear negative effect of military burden awhile the results for Spain are much less clearcut..

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