The controversies of destructive spending: Arms production and growth in the post-Cold War era

Sammanfattning: Critics of the GDP measure are claiming that it fails to capture the true well-being of a country and demand that alternative measures be developed. To determine how the destructive spending on arms should enter a new measure, an understanding of its effects on GDP is required. The literature focusing on how arms production and spending on defense impact economic growth is neither conclusive nor consistent. This paper assesses the methods used by the current body of literature with the purpose of moving the discussion beyond its current impasse. Regressions with OLS, GLS, fixed, and time-fixed effects on unbalanced panel data during 1995-2014 are performed to examine the growth effects of military spending, arms trade and war. The results are ambiguous in spite of these efforts, indicating that a new approach is needed. Lastly, suggestions on where to go from here are given.