The Effect of Military Expenditure on Profit Rates Evidence from Major Countries

Main Article Content

Adem Yavuz Elveren
Sara Hsu

Abstract

This article provides evidence of the effect of military expenditures on the rate of profits by focusing on 32 major countries for the period of 1963-2008 by using data from the Extended Penn World Tables, the University of Texas Inequality Project Estimated Household Income Inequality, the World Development Indicator, and the Stockholm International Peace Research Institute. The article employs a Generalized Method of Moment model within a Marxist framework. Findings show that military expenditures have positive effect on the rate of profits. It is also showed that increasing income inequality increases the rate of profits. Finally, the findings suggest that while military expenditures have a positive effect on the profit rates in the case of both armsexporting countries and net-arms exporters, the relationship is not that significant in the case of arms-importing countries.

Downloads

Download data is not yet available.

Article Details

How to Cite
Elveren, A., & Hsu, S. (2018). The Effect of Military Expenditure on Profit Rates. World Journal of Applied Economics, 4(2), 75-94. https://doi.org/10.22440/wjae.4.2.2
Section
Articles

References

Abell, J. D. (1990). Defence Spending and Unemployment Rates: An Empirical Analysis Disaggregated by Race. Cambridge Journal of Economics, 14 (4), 405-419. http://dx.doi.org/10.1093/oxfordjournals.cje.a035143

Ali, H. E. (2007). Military Expenditures and Inequality: Empirical Evidence from Global Data. Defence and Peace Economics, 18 (6), 519-535. http://dx.doi.org/10.1080/10242690701331501

Alptekin, A., & Levine, P. (2012). Military Expenditure and Economic Growth:A Meta-analysis. European Journal of Political Economy, 28 (4), 636-650. http://dx.doi.org/10.1016/j.ejpoleco.2012.07.002

Arellano, M., & Bond, S. (1991). Some Tests of Specifcation for Panel Data: Monte Carlo Evidence and an Application to Employment Equations. Review of Economic Studies,58 (2), 277-297. http://dx.doi.org/10.2307/2297968

Baltagi, B. H. (1995). Econometric Analysis of Panel Data. Wiley.

Baran, P. A., & Sweezy, P. M. (1966). Monopoly Capital: An Essay on the AmericanEconomic and Social Order. Monthly Review Press, New York and London.

Basu, D., & Vasudevan, R. (2013). Technology, Distribution and the Rate of Proft in the US Economy: Understanding the Current Crisis. American Economic Review, 37 (1),57-89. http://dx.doi.org/10.1093/cje/bes035

Blundell, R., & Bond, S. (1998). Initial Conditions and Moment Restrictions in DynamicPanel Data Models. Journal of Econometrics, 87 (1), 115-143. http://dx.doi.org/10.1016/S0304-4076(98)00009-8

Bond, S. (2002). Dynamic Panel Data Models: A Guide to Micro Data Methods and Practice (Centre for Microdata Methods and Practice (CEMMAP) Working Papers No. CWP09/02).

Carvalho, L., & Rezai, A. (2016). Personal Income Inequality and Aggregate Demand. Cambridge Journal of Economics, 40 (2), 491-505. http://dx.doi.org/10.1093/cje/beu085

Chester, E. (1978). Military Spending and Capitalist Stability. Cambridge Journal of Economics, 2 (3), 293-298. http://dx.doi.org/10.1093/oxfordjournals.cje.a035392

Coulomb, F. (2004). Economic Theories of Peace and War. Routledge, London and New York.

Coulomb, F., & Bellais, R. (2008). The Marxist Analysis of War and Military Expenditures, Between Certainty and Uncertainty. Defence and Peace Economics, 19 (5), 351-359. http://dx.doi.org/10.1080/10242690802354345

Cypher, J. (1987a). Military Spending, Technical Change, and Economic Growth: A Disguised form of Industrial Policy? Journal of Economic Issues, 21 (1), 33-59. http://dx.doi.org/10.1080/00213624.1987.11504597

Cypher, J. (1987b). Military Production and Capital Accumulation: A Comment. Journal of Post-Keynesian Economics, 10 (2), 304-309. http://dx.doi.org/10.1080/01603477.1987.11489679

Deininger, K., & Squire, L. (1996). A New Data Set Measuring Income Inequality. World Bank Economic Review, 10 (3), 565-591. http://dx.doi.org/10.1093/wber/10.3.565

Dumitrescu, E.-I., & Hurlin, C. (2012). Testing for Granger Non-causality in Heterogeneous Panels. Economic Modeling, 29 (4), 1450-1460. http://dx.doi.org/10.1016/j.econmod.2012.02.014

Dumenil, G., & Levy, G. (2011). The Crisis of the Early 21st Century: A Critical Review of Alternative Interpretations [Mimeo]. http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.473.5051&rep=rep1&type=pdf.

Dunne, J. P. (1990). The Political Economy of Military Expenditure: An Introduction. Cambridge Journal of Economics, 14 (4), 395-404. http://dx.doi.org/10.1093/oxfordjournals.cje.a035142

Dunne, J. P. (1991). Quantitative Marxism. Cambridge: Polity Press.

Dunne, J. P., Pieroni, L., & d'Agostino, G. (2013). Military Spending and the Falling Rate of Proft in the US [Mimeo].

Dunne, J. P., & Uye, M. (2010). Military Spending and Development. In A. T. H. Tan (Ed.), The Global Arms Trade: A Handbook (p. 293-305). Routledge, London.

Dutt, A. K. (2006). Maturity, Stagnation and Consumer Debt: A Steindlian Approach. Metroeconomica, 57 (3), 339-364. http://dx.doi.org/10.1111/j.1467-999X.2006.00246.x

Elveren, A. Y., & Dunning, R. (2017). Do Military Expenditures Boost Proft Rates? (Munich Personal RePEc Archive (MPRA) No. 81143).

Elveren, A. Y., & Hsu, S. (2016). Military Expenditures and Proft Rates: Evidence from OECD Countries. Metroeconomica, 67 (3), 551-577. http://dx.doi.org/10.1111/meca.12111

Elveren, A. Y., & Ozgur, G. (2018). The Effect of Military Expenditures on the Proft Rates in Turkey (Munich Personal RePEc Archive (MPRA) No. 88848).

Engels, F. (1877). Anti-Duhring. http://www.marxists.org/archive/marx/works/1877/anti-duhring/ch15.htm#061.

Engels, F. (1893). Can Europe Disarm? In Karl Marx Frederick Engels Collected Works.

Estimated Household Income Inequality. (2017). https://sites.google.com/a/newschool.edu/duncan-foley-homepage/home/EPWT.

Extended Penn World Tables. (2018). https://utip.lbj.utexas.edu/.

Foley, D., & Marquetti, A. (1997). Economic Growth from a Classical Perspective.

In International Colloquium on Money, Growth, Distribution and Structural Change: Contemporaneous Analysis. https://pdfs.semanticscholar.org/85d8/d0f3fca9c9c1e42fb72992c4503979811440.pdf.

Friedman, S. R. (1974). An Alternative Model to Szymanski's. American Journal of Sociology, 79 (6), 1459-1462. http://dx.doi.org/10.1086/225712

Galbraith, J. K., Jiaqing, L., & Darity, J. W. A. (1999). Measuring the Evolution of Inequality in the Global Economy (University of Texas Inequality Project (UTIP) Working Paper No. 7).

Galbraith, J. K., & Kum, H. (2005). Estimating the Inequality of Households Incomes: Toward a Dense and Consistent Global Data Set. Review of Income and Wealth, 51 (1), 115-143. http://dx.doi.org/10.1111/j.1475-4991.2005.00147.x

Georgiou, G. (1983). The Political Economy of Military Expenditures. Capital & Class, 7 (1), 183-205. http://dx.doi.org/10.1177/030981688301900108

Georgiou, G. (1992). Military Expenditure and the Rate of Proft: Some Empirical Results. International Review of Applied Economics, 16 (3), 344-361. http://dx.doi.org/10.1080/758534266

Gottheil, F. (1986). Marx versus Marxists on the Role of Military Production in Capitalist Economies. Journal of Post-Keynesian Economics, 2 (8), 563-73. http://dx.doi.org/10.1080/01603477.1986.11489584

Green, D. W., & Higgins, C. I. (1977). SOVMOD I: A Macro-econometric Model of the Soviet Union. Academic Press, London.

Hartley, K., & McLean, P. (1978). Military Expenditure and Capitalism: A Comment. Cambridge Journal of Economics, 2 (3), 287-292. http://dx.doi.org/10.1093/oxfordjournals.cje.a035391

Hsiao, C. (1986). Analysis of Panel Data. Cambridge University of Press, Cambridge.

Hunt, E. K. (1972). Property and Prophets. Harper and Row, New York.

Kaldor, M. (1977). The Role of Arms in Capitalist Economies: The Process of Overdevelopment and Underdevelopment. In D. Carleton & C. Schaerf (Eds.), Arms Control and Technological Innovation. Croom Helm, London.

Kalecki, M. (1972). he Last Phase in the Transformation of Capitalism. Monthly Review Press, New York.

Kidron, M. (1970). Western Capitalism Since the War Revised Edition. Pelican Books, Harmondsworth.

Kollias, C., & Maniatis, T. (2003). Military Expenditure and the Proft Rate in Greece. Defence and Peace Economics, 14 (2), 117-127. http://dx.doi.org/10.1080/10242690302920

Luxemburg, R. (1913[2015]). The Accumulation of Capital. Mansfeld Centre, CT: Martino Publishing.

Magdoff, H. (1970). Militarism and Imperialism. The American Economic Review, 60 (2), 237-42. http://dx.doi.org/10.14452/MR-021-09-1970-02 1

Maito, E. E. (2016). The Historical Transience of Capital Datasets [Mimeo]. https://uba.academia.edu/EstebanMaito/The-Historical-Transience-of-Capital-Datasets.

Mandel, E. (1978). Late Capitalism. Verso, New York.

Marx, K. (1848a). Manifesto of the Communist Party. https://www.marxists.org/archive/marx/works/1848/communist-manifesto/index.htm.

Marx, K. (1848b). The Discourse on Free Trade. www.marxists.org/archive/marx/works/1848/free-trade/.

Melman, S. (1965). Our Depleted Society. Holt, Rinehart and Winston, New York.

Miller, J. (1987). Military Spending and Economic Crises: A Comment on Gottheil and Riddell. Journal of Post-Keynesian Economics, 10 (2), 310-318. http://dx.doi.org/10.1080/01603477.1987.11489680

Nickell, S. (1981). Biases in Dynamic Models with Fixed Effects. Econometrica, 49 (6),1417-1426. http://dx.doi.org/10.2307/1911408

Ochoa, E. M. (1984). Labour Values and Prices of Production: An Interindustry Study of the US Economy, 1947-1972 (PhD Thesis). Ann Arbor, MI.

O'Connor, J. (1973). The Fiscal Crisis of the State. St Martin's Press, New York.

Palley, T. (2002). Economic Contradictions Coming Home to Roost? Does the U.S. Economy Face a Long-term Aggregate Demand Generation Problem? Journal of Post Keynesian Economics, 25 (1), 9-32. http://dx.doi.org/10.1016/j.exis.2015.02.008

Petrovic, P. (1987). The Deviation of Production Prices from Labour Values: Some Methodology and Empirical Evidence. Cambridge Journal of Economics, 11 (3), 197-210. http://dx.doi.org/10.1093/oxfordjournals.cje.a035026

Pivetti, M. (1992). Military Spending as a Burden on Growth: An `Underconsumptionist' Critique. Cambridge Journal of Economics, 16 (4), 373-384. http://dx.doi.org/10.1093/oxfordjournals.cje.a035209

Pivetti, M. (1994). Effective demand, `marxo-marginalism' and the economics of military spending: A rejoinder. Cambridge Journal of Economics, 18 (5), 523-527. http://dx.doi.org/doi.org/10.1093/oxfordjournals.cje.a035288

Purdy, D. (1973). The Theory of the Permanent Arms Economy-A Critique and an Alternative. Bulletin of the Conference of Socialist Economists, 5 (1), 12-33.

Reich, M. (1972). Does the US Economy Require Military Spending? The American Economic Review, 62 (1/2), 296-303.

Roberts, M. (2012). A World Rate of Proft [Mimeo]. http://thenextrecession.files.wordpress.com/2012/09/a-world-rate-of-profit.pdf.

Roodman, D. (2006). How to Do xtabond2: An Introduction to "Difference" and "System" GMM in Stata (Center for Global Development Working Paper No. 103).

Roodman, D. (2009). How to Do xtabond2: An Introduction to Difference and System GMM in Stata. Stata Journal, 9 (1), 86-136.

Rowthorn, B. (1980). Capitalism Conict & In ation Essays in Political Economy. Lawrence and Wishart, London.

Shaikh, A. (1984). The Transformation from Marx to Sraffa. In E. Mandel & A. Freeman (Eds.), Ricardo, Marx, Sraffa: The Langston Memorial Volume (p. 293-305). Verso, London.

SIPRI (Stockholm International Peace Research Institute). (2017). www.sipri.org.

Smith, R. (1977). Military Expenditure and Capitalism. Cambridge Journal of Economics, 1(1), 61-76. http://dx.doi.org/10.1093/oxfordjournals.cje.a035351

Smith, R. (1978). Military Expenditure and Capitalism: A Reply. Cambridge Journal of Economics, 2 (3), 299-304. http://dx.doi.org/10.1093/oxfordjournals.cje.a035393

Smith, R. (1980). Military Expenditure and Investment in OECD Countries, 1954-1973. Journal of Comparative Economics, 4 (1), 19-32. http://dx.doi.org/10.1016/0147-5967(80)90050-5

Smith, R. (1983). Aspects of Militarism. Capital & Class, 7 (1), 17-30. http://dx.doi.org/10.1177/030981688301900102

Smith, R., & Dunne, P. (1994). Is Military Spending a Burden? A `Marxomarginalist' Response to Pivetti. Cambridge Journal of Economics, 18 (5), 515-521. http://dx.doi.org/10.1093/oxfordjournals.cje.a035287

Stevenson, P. (1974). A Defense of Baran and Sweezy. American Journal of Sociology,79 (6), 1456-1459. http://dx.doi.org/10.1086/225711

Sweezy, P. (1973). Comments on Szymanski's Paper `Military Spending and Economic Stagnation'. The American Journal of Sociology, 79 (3), 709-710. http://dx.doi.org/10.1086/225593

Szymanski, A. (1973a). Military Spending and Economic Stagnation. American Journal of Sociology, 79 (1), 1-14. http://dx.doi.org/10.1086/225503

Szymanski, A. (1973b). Reply to Sweezy. American Journal of Sociology, 79 (3), 710-711. http://dx.doi.org/10.1086/225594

Szymanski, A. (1974). A reply to Friedman, Stevenson, and Zeitlin. American Journal of Sociology, 79 (6), 1462-1477. http://dx.doi.org/10.1086/225713

Tasiran, A. C., & Elveren, A. Y. (2017). Soft Modelling of Military Expenditures, Inequality and Profts [Mimeo]. https://www.aeaweb.org/conference/2017/preliminary/paper/DRSifQkh.

Theil, H. (1972). Statistical Decomposition Analysis: With Application to the Social and Administrative Science. North Holland, Amsterdam and London.

Tongur, U., & Elveren, A. Y. (2017). The Nexus of Economic Growth, Military Expenditures, and Income Inequality.

Tongur, U., Hsu, S., & Elveren, A. Y. (2015). Military Expenditures and Political Regimes: Evidence from Global Data, 1963-2000. Economic Modelling, 44 , 68-79. http://dx.doi.org/10.1016/j.econmod.2014.10.004

UTIP (University of Texas Inequality Project). (2018). http://utip.lbj.utexas.edu/.

Vasudevan, R. (2016). Financialization, Distribution and Accumulation: A Circuit of Capital Model with A Managerial Class. Metroeconomica, 67 (2), 397-428. http://dx.doi.org/10.1111/meca.12106

Weisskopf, T. (1976). Theories of American Imperialism. In D. Mermelstein (Ed.), Economics: Mainstream Reading and Radical Critiques. Random House, New York.

World Development Indicators. (2017). http://wdi.worldbank.org/tables. Zeitlin, M. (1974). On Military Spending and Economic Stagnation". American Journal of Sociology, 79 (6), 1452-1456. http://dx.doi.org/10.1086/225710