Impact of US Military Spending on Economic Growth

Impact of the military sector on the US economy
ABSTRACT
The overall aim of this research is to analyse the effect of military expenditure on the economic
growth of the US. In particular, this research has three main research objectives as follows: (1) to
review the main theories regarding the effect of military expenditure on the economic growth in
nations, (2) to analyse how military expenditure affects the economic growth of the US and (3)
to suggest recommendations for the US government to increase the security of the US and to
enhance the economic development of the US in the future. This research completes all research
objectives and the overall research aim. This research has chosen positivism philosophy,
deduction approach, case study strategy, quantitative study method, and secondary data to gain
these research objectives.
This research explores that there is not any impact of military expenditure on the economic
growth of the US. Indeed, this nation has had a suitable national budget for all its national
aspects such as military expenditure, health care expenditure, welfare expenditure, pension
expenditure, educational expenditure, public infrastructure expenditure and then, the economic
growth are decided by many aspects rather than its military spending. Also, this research has
suggested recommendations for the US government to increase the security of the US and to
enhance the economic growth of the US in the future.

ACKNOWLEDGEMENT
I would like to express my deepest depreciation to Christa Brunnschweiler - Senior Lecturer in
Economics. Without her assistance and support, this dissertation would not have been possible.
Moreove, I would like to thank my family and all of my friends for their unconditional love and
support.
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CONTENTS
ABSTRACT .................................................................................................................................................. 0
ACKNOWLEDGEMENT ............................................................................................................................ 1
CHAPTER ONE: INTRODUCTION ........................................................................................................... 4
1.1 Chapter introduction ............................................................................................................................... 4
1.2 Research background .............................................................................................................................. 4
1.3 Research rationale ................................................................................................................................... 5
1.4 Research aim, objectives and questions .................................................................................................. 6
1.4 Research methodology brief ................................................................................................................... 6
1.5 Research structure ................................................................................................................................... 7
1.6 Chapter conclusion .................................................................................................................................. 8
CHAPTER TWO: LITERATURE REVIEW ............................................................................................... 9
2.1 Chapter introduction ............................................................................................................................... 9
2.2 Military expenditure ................................................................................................................................ 9
2.3 The impact of military expenditure on the economic growth of nations .............................................. 10
2.3.2 Classical school of thought – the negative impact of military expenditure on economic growth . 10
2.3.2 Keynesian school of thought – the positive impact of military expenditure on economic growth 12
2.3.3 Non-relationship between military expenditure and economic growth .........................................13
2.4 The impact of military expenditure on the economic growth of the US ...............................................13
2.5 Chapter conclusion ................................................................................................................................14
CHAPTER THREE: METHODLOGY ......................................................................................................16
3.1 Chapter introduction .............................................................................................................................16
3.2 Research philosophy .............................................................................................................................16
3.3 Research approach ................................................................................................................................16
3.4 Research strategy ..................................................................................................................................17
3.5 Research method ...................................................................................................................................17
3.6 Data source............................................................................................................................................18
3.7 Limitations of used research methodology ...........................................................................................18
3.8 Chapter conclusion ................................................................................................................................19
CHAPTER FOUR: FINDINGS, ANALYSIS AND DISCUSSION .......................................................... 20
4.1 Chapter introduction .............................................................................................................................20
4.2 Military expenditure of the US .............................................................................................................20
4.3 Impact of military expenditure on the economic growth of the US ......................................................22
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4.4 Discussion of research findings ......................................................................................................................26
4.5 Chapter conclusion............................................................................................................................................28
CHAPTER FIVE: CONCLUSION AND RECOMMENDATION .................................................................30
5.1 Chapter introduction.........................................................................................................................................30
5.2 Research conclusions........................................................................................................................................30
5.3 Research contributions .....................................................................................................................................31
5.4 Research limitations..........................................................................................................................................31
5.5 Recommendations.............................................................................................................................................32
5.6 Chapter conclusion............................................................................................................................................32
REFERENCES.........................................................................................................................................................34
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CHAPTER ONE: INTRODUCTION
1.1 Chapter introduction
This chapter introduces research background and the research motivation. This chapter also
suggests the research aim, outlines research objectives and designs research questions. Moreover,
this chapter presents the research structure so that readers can have basic understandings about
the whole contents of this research.
1.2 Research background
In the current period, nations focus much on fulfilling their requirements in terms of economic
development and protecting themselves from other nations’ threats. Thus, they always separate a
part of their budgets for serving military issues (Sakaki, and Lukner, 2013). Two great wars
occurred in the world caused massive changes in the world economies. In 1914, the First World
War began and finished in 1918, and in 1939, the Second World War began and finished in
1945. Also, the Cold War amongst Western Alliance (NATO) and Eastern bloc nations during
1947-1991 caused significant increases in costs of military of these unions. After the Cold War
had finished, there were significant decreases in military expenditures of these unions. Chaos
began in some nations across the globe after finishing the Cold War. In some nations in the
world, civil wars are started due to ideological, religious, ethnic rationales. Also, currently, there
are long-term conflicts between Palestine and Israel in the Middle East, there is a war risk
between North Korea and South Korea in the future, and there are some nations in the world that
their national security is not protected because of its weak national military (Korkmaz, 2015).
Military costs are the parts that are separated by nations from their national income to offer their
security against external threats and internal threats. Military costs are costs related to the
production of vehicles and tools used in military, import costs of the vehicles and tools, repair
and maintenance expenses for the vehicles and tools, costs for research and development (R&D)
activities and costs for employing civilian employees in the field of defence (Atland, 2011). If
governments feel that there is a threat to their nations’ security, they will increase defence
spending and will decrease their investments into other national fields such as building roads and
upgrading infrastructure. Currently, the impact of military costs on the economic growth is one
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of the most discussed subjects. Many nations use a larger amount of money from their national
income to serve military aspects compared with infrastructure, health and educational
expenditures. In the United States (the US), the national security have much focused (Heo,
2010). Thus, it is necessary to analyse the military costs of the US and to examine how military
expenditures of the US affect its economic growth.
1.3 Research rationale
This research needs to be performed because of three main research rationales as follows:
Firstly, the security of a nation is critical for the nation to protect the welling-being of its
citizens. In the case of the US, the US government focuses much on protecting the security of the
US from the threats of other nations (Gerace, 2002; Heo, 2010). This research focuses much on
analysing the military costs of the US and discussing how military expenditures of the US affect
its economic growth. This research will create good conditions for the US government to know
whether the military costs of the US have a positive impact on the economic development of this
nation. Then, the US government can give the planning for its military costs in the effective
ways.
Secondly, in the US, military aspects have been focused by the US government. The political
stability creates good conditions for the US government in retaining the leading position in the
world (Mearsheimer, 2010; Heo, 2010). Then, it is important for the US to pay much attention to
its military issues so that it can protect the political stability and can increase the economic
growth. This research focuses much on analysing the effect of military expenditure on economic
growth of the US.
Finally, in the literature, many researchers focus much on investigating the impact of military
expenditure on the economic growth of continents such as Africa, Europe, Australia, America,
and Asia (Sakaki and Lukner, 2013; Korkmaz, 2015). The difference of this research from other
researchers is that the impact of military expenditure on the economic growth is examined in a
single case, that is, the US. Then, this research will be a useful tool for the US government to
investigate how military costs of the US have a positive impact on the economic growth of this
nation.
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Because of the above rationales, this research has a research title as follows: “The effect of
military expenditure on the economic growth of the United States.”
1.4 Research aim, objectives and questions
The overall aim of this research is to analyse the effect of military spending on the economic
growth of the US. In particular, this research must complete three main research objectives as
follows:
- To review the main theories regarding the effect of military expenditure on the economic
growth in nations
- To analyse how military expenditure affects the economic growth of the US
- To suggest recommendations for the US government to increase the security of the US and to
enhance the economic growth of the US in the future
From the above aim and objectives, this research must answer three main research questions as
follows:
- What are key theories regarding the effect of military expenditure on the economic growth in
nations?
- How does military expenditure affect the economic growth of the US?
- How can the US government increase the security of the US and enhance the economic growth
of the US in the future?
1.4 Research methodology brief
This research chooses positivism philosophy, deduction approach, case study strategy,
quantitative method, and secondary data because the research methodology can help this
research to have analyses of the impact of military expenditure on the economic growth of the
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US and to reduce the research time and the research costs. In addition, the research methodology
can create the reliable research findings that can be used in the practice of the US.
1.5 Research structure
Apart from the first chapter – Introduction, this research consists of four additional particular
chapters as follows:
Chapter two (Literature review) has a main purpose for critically analysing issues related to
military expenditure, critically analysing the impact of military expenditure on the economic
growth of nations and reviewing the previous papers regarding the impact of military
expenditure on the economic growth of the US. This chapter is basic information for this
research to have deep understandings about main theories in terms of the impact of military
expenditure on the economic growth.
Chapter three (Methodology) has main purpose for presenting rationales for choosing positivism
philosophy, deduction approach, case study strategy, quantitative method, and secondary data. In
addition, this chapter presents research ethics and the limitations of used research methodology
by this research.
Chapter four (Findings, analysis and discussion) is about analysis of the impact of military
expenditure on the economic growth of the US. In addition, this chapter compares and contrasts
this research’s study findings to earlier studies’ study findings so that it can indicate similarities
and differences amongst this research’s study findings to the earlier studies’ study findings.
Chapter five (Conclusion and recommendation) is crucial for the researcher to summarize all
research results, to express research contributions, and to describe study limitations. In addition,
this chapter suggests recommendations for the US government to increase the security of the US
and to enhance the economic growth of the US in the future.
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1.6 Chapter conclusion
Through this chapter, the researcher can present the research context, the motivation for
conducting this research, the description of the research objectives and aim, the design of
research questions and the description of research structure. The next chapter will create good
conditions for this research to review main theories in relation to research objectives.
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CHAPTER TWO: LITERATURE REVIEW
This chapter has a main purpose of critically analysing main theories about issues of military
expenditure, the impact of military expenditure on the economic growth of nations and the
impact of military expenditure on the economic growth of the US from the previous studies. This
chapter will help this research to gain the first research objective.
2.2 Military expenditure
The military expenditure is regarded as all costs serving all aspects related to national defense.
The military expenditure includes costs used for armed forces, costs used for defense ministries
and other governmental agencies conducting defense projects, costs used for military space
activities, costs used for paramilitary forces that are available for military activities, costs used
for military personnel’s retirement pensions, costs used for social services for military personnel
and their families, costs used for military R&D activities, costs used for purchases vehicles and
tools of military and other costs related to military activities (Mallick, 2007; Bahadori et al.,
2015).
According to Abedi and Mazruee (2010), military expenditure accounts for a large part of
national budgets of nations and the military strength proves the national strength of nations.
Indeed, a nation that has a large budget for military development has a large national income. For
example, Russia has a large budget for military development and has military strength. Then,
there is the political stability in Russia (Atland, 2011). On the other hand, Palestine has a small
budget for military development and does not have military strength. Then, there are a large
number of external aggression in Palestine (Chretien et al., 2007; Sakaki and Lukner, 2013;
Tartir, 2015). Thus, it is important for governments to focus much on using their national
budgets to develop military strength to protect the national security and to prove the national
strengths for nations in the world. When the military strength of a nation is created, the political
stability of the nation is also created and the military strength is regarded as a part for deciding
the economic growth of the nation (Sakaki and Lukner, 2013).
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2.3 The impact of military expenditure on the economic growth of nations
2.3.2 Classical school of thought – the negative impact of military expenditure on economic
growth
The Classical school of thought supports there is a negative impact of military expenditure
oneconomic growth. In other words, increased military expenditure retards the economic growth.
In particular, this school of thought reflects that a higher level of military expenditure implies a
lower level of domestic savings, a lower level of private investment, a lower level of aggregate
demand and a lower level of consumption. This school of thought explains that a higher level of
military expenditure will result in increased interest rate that will reduce the private investment,
will reduce domestic savings, and will reduce aggregate demand that will lead to low
consumption (Kyed and Gravers, 2015; Korkmaz, 2015).
Cappelen et al. (1984) conducted research about the relation amongst economic growth and
military expenditure of 17 OECD nations from 1960 to 1980. These researchers explored that
military expenditure had a negative impact on national investment and then the military
expenditure and reduced national investment had a negative effect on economic growth of the 17
OECD nations during the period of 1960-1980. Thus, these researchers confirmed that there was
the negative relation amongst economic growth and military expenditure of 17 OECD nations
from 1960 to 1980. DeRouen (1994) investigated the relationship amongst economic growth and
military expenditure in Latin America and the researcher explores that the negative relationship
amongst economic growth and military expenditure in Latin America because increased military
expenditure reduces the ability of nations in Latin America to invest other fields such as R&D
activities, economic expansion, educational development, public infrastructures, etc.
Dunne et al. (2002) have offered a contribution to the literature in terms of the influence of
military expenditure on economy development in small industrialising economies because the
researchers indicate that there is a negative influence of military expenditure on economic
growth and economic investment. Kollias et al. (2004) investigated the relation amongst
economic growth and military expenditure in 15 members of Europe by using causality and co-
integration tests from 1961 to 2000. The researchers reflected that negative causality amongst
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economic growth and military spending during the period of 1961-2000. Yildirim et al. (2005)
conducted a research related to the influences of military spending on economy development in
Turkey and Middle Eastern nations from 1989 to 1999 and the researchers investigated the
relationship amongst economy development and military expenditure by using techniques of
dynamic panel estimation and cross-section. The researchers reflected that military spending
increases economy development in Turkey and Middle Eastern nations during the period of
1989-1999. In other words, there was a positive relation amongst economic growth and military
expenditure in Turkey and Middle Eastern during the period of 1989-1999.
Chang et al. (2011) investigated a relation amongst military expenditure and economy
development in 90 nations all over the world during the period of 1992-2006 and the researchers
reflected that military spending resulted in negative economy development in the 90 nations
including Middle East-South Asia region and European region the during the period of 1992-
2006. The researchers indicated that these 90 nations focused much on military sector and then,
the nations did not have much money to develop other fields such as R&D, educational sector,
and public infrastructures. Yang et al. (2011) investigate the relation amongst economy
development and military expenditure in 23 nations across the globe. These researchers explore
that military expenditure has a substantial negative relation with economy development in these
23 nations and the high national security threat level leads to high military expenditure that
reduces economy growth of these 23 nations.
Dunne and Tian (2013) used a model of exogenous growth and method of dynamic panel data
for examining the relation amongst military burden and economic growth in 106 nations all over
the world during the period of 1988-2010. The researchers explored that military burden had a
negative influence on economy development of these 106 nations in the long time and the short
time. Pradhan et al. (2013) explored the relationship amongst economy development and military
expenditure in 22 nations all over the word during the period of 1988-2012 and the researchers
explored that there was a negative causality amongst economic growth and military expenditure
in these 22 nations during the period of 1988-2012. Pan et al. (2014) explores that there is the
negative causality amongst economic growth and military expenditure in 10 Middle East nations.
Chang et al. (2014) explored that there is the negative causality amongst economic development
and military spending in G7 nations (the US, the UK, Japan, Italy, Germany, France, and
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Canada) and China by concentrating nation-specific analysis for the period of 1988-2010.
Korkmaz (2015) investigated the influence of military expenditure on economy development and
unemployment in Mediterranean nations and the researcher explores that there is a negative
relation amongst economy development and military expenditure in the Mediterranean nations
and this thing increase unemployment situation in the Mediterranean nations.
2.3.2 Keynesian school of thought – the positive impact of military expenditure on
economic growth
The Keynesian school of thought reflects that increased military expenditure encourages
demand, enhances purchase power, creates positive externalities and increases national output
(Narayan and Singh, 2007; Hines et al., 2014). Endogenous growth theory suggests that
expenditure of government has a significant influence on the growth rate in the long time. The
influence is dependent upon the government intervention size and upon the various components
of public expenditure. In addition, various types of government expenditures have heterogeneous
impacts on the economy growth. For instance, R&D activities, public infrastructures and public
education are often regarded as public goods which have a positive influence on the economy
growth. By contrast, government spending that focuses much on non-productive aspects will lead
to a decrease in income growth. In particular, governments that have a great focus on financing
military sector will have a reduction in economic growth. In other words, endogenous growth
theory offers a foundation for the negative relationship between military expenditure and
economic growth in the long time (Pieroni, 2009; Mearsheimer, 2010).
Lee and Chen (2007) investigated the relation amongst economy development and military
expenditure in 62 non-OECD nations and 27 OECD nations during the period of 1988-2003 and
the researchers reflected that there was a positive relation amongst economic growth and military
expenditure in 27 OECD nations while there was a negative relation amongst military
expenditure and economic growth in 62 non-OECD nations. Wijeweera and Webb (2011)
examined the relationship amongst economy development and military expenditure in five South
Asian nations, mainly Bangladesh, Sri Lanka, Nepal, Pakistan and India during the period of
1988-2007 and the researchers explored that an increase of 1 percent in military expenditure
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would increase 0.04% of real GDP and military expenditure in these nations had a negligibly
positive impacts on economy development during the period of 1988-2007.
2.3.3 Non-relationship between military expenditure and economic growth
Alexander (1990) conducts a research about the influence of military expenditure on economy
growth in developed nations, and the researcher concludes that there is not any impact of military
expenditure on economic growth, although the defence sectors of the developed nations are
significant less productivity than the retaining sectors of the developed nations. Aye et al. (2014)
investigated a relation amongst economic growth and military expenditure of South Africa
during the period of 1951-2010 and the researchers explored that there was not any impact of
military expenditure on economic growth in South Africa during the period of 1951-2010.
The conclusions that are obtained from previous studies related to the relationship amongst
economic growth and military expenditure can be summarized as follows: (1) in previous
researches conducted by Cappelen et al. (1984), DeRouen (1994), Dunne (2002), Kollias et al.
(2004), Yang et al. (2011), Chang et al. (2011), Dunne and Tian (2013), Pradhan et al. (2013),
Pan et al. (2014), Chang et al. (2014), and Korkmaz (2015), it reflects that military expenditure
has a negative influence on economic growth of nations, (2) in previous studies conducted by
Wijeweera and Webb (2011), Lee and Chen (2007) and Yildirim et al. (2005), it reflects that
military expenditure has a positive influence on economic growth of nations and (3) in previous
researches conducted by Alexander (1990), and Aye et al. (2014), it reflects that there is not any
relation amongst economic growth and military expenditure of nations. Thus, depending upon
the national context, military expenditure can have a negative impact, a positive impact or no
impact on the economic growth of nation. The governments of nations need to pay much
attention to this so that they can have suitable plans for their military expenditure.
2.4 The impact of military expenditure on the economic growth of the US
Heo (2000) indicated that military expenditure did not have any impact on economic growth of
the US during the period of 1948-1996 and the researcher explored that health care expenditure
and educational expenditure had highly positive impacts on economic growth while defense
expenditure did not have any contribution to the economic growth of this nation during the
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period of 1948-1996. During the period of 1948-1996, economic growth in the US is not
dependent upon the military expenditure. Gerace (2002) explored that there was no any
relationship amongst military expenditure and economic growth in the US during the period of
1951-1997 because the researcher confirmed that the military expenditure per capita in the US
was not large enough to have an impact on the US economy growth and the economic growth is
dependent upon other factors like educational expenditure, infrastructure expenditure, and health
care expenditure. Heo (2010) also conducted a research related to the impact of military
expenditure of the US on the economy development of this nation during the period of 1954-
2005 and the results of the researcher reflected that defense spending did not have any impact on
the growth of the US economy because the researcher explored that the increase or the decrease
of the GDP of this nation during the period of 1954-2005 was not caused by the increase or the
decrease of military expenditure of this nation but the increase or the decrease of the GDP of this
nation during that period was caused by the increase or the decrease of health care expenditure,
educational expenditure, infrastructure expenditure and national pension expenditure.
In short, Heo (2000) confirmed that military expenditure did not have any impact on economic
growth of the US during the period of 1948-1996, Gerace (2002) confirmed that military
expenditure did not have any impact on economic growth of the US during the period of 1951-
1997 and Heo (2010) confirmed that military expenditure did not have any impact on economic
growth of the US during the period of 1954-2005. Thus, based on the three previous studies, this
research concludes that military expenditure did not have any impact on economic growth of the
US during the period of 1948-2005.
This chapter has critically analysed issues of military expenditure, has reviewed the impact of
military expenditure on the economic growth of nations. This chapter has explored that military
expenditure has negative impacts on the economic growth of some nations while it has positive
impacts on the economic growth of other nations. Therefore, dependence on the different context
of nations, military expenditure can have negative impacts or positive impacts on the economic
growth of the nations. However, this chapter explores that military expenditure did not have any
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impact on economic growth of the US during the period of 1948-2005. The next chapter will
present the research methodology that is used to conduct this research.
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CHAPTER THREE: METHODLOGY
This chapter has main purpose for presenting rationales for choosing positivism philosophy,
deduction approach, case study strategy, quantitative method, and secondary data. In addition,
this chapter presents research ethics and the limitations of used research methodology by this
research. Through this chapter, the researcher will choose the most appropriate research
methodology for handling the research objectives.
3.2 Research philosophy
A researcher will select his or her own study philosophy to gain valid research results according
to his or her desires when performing a study. If a researcher selects positivism philosophy, he or
she will use objective ideas and objective evidences to solve research matters and to achieve
research goals. Then, the research results of the research seeking positivism philosophy are not
deep but they are very reliable (Myers, 2008). Otherwise, when a researcher seeks interpretivism
philosophy, he will focus much on exploring research matters more deeply through his or her
own subjective ideas. Hence, the research results of the research seeking interpretivism
philosophy are less reliable but they are very valid and very deep (Collins, 2010). This research
uses positivism philosophy since this research focuses much on gaining reliable research findings
so that the US government can make references of this research to increase the economic growth
of the US in the future (Altinay and Paraskevas, 2008). In addition, the positive philosophy
focuses much on examining the relations amongst element. This research is about examination of
the military expenditure affects the economic growth of the US. Thus, the positivism philosophy
should be chosen by this research.
3.3 Research approach
When conducting academic researches, researchers will choose certain study approaches so that
they can utilise current theories about their own study aspects or they can develop new theories
about their own study aspects. When researchers choose deduction approach, they will initially
evaluate and analyse current theories about their own study aspects and will utilise the current
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theories so that they can explore these current theories in their own study cases (Glaser, 2014). In
contrast, when researchers choose induction approach, they will understand that they must create
new theories for their own study issues because their own study issues are new issues and are not
still explored by previous studies and current studies (Read, 2016). This research has a study
approach, namely deduction approach because it initially evaluates and analyses current theories
about the influence of military expenditure on economy development in the case of the US.
Moreover, due to the deduction approach, the author of this dissertation can complete this
dissertation more quickly than the induction approach (Prathapan, 2014). Indeed, utilisation of
current theories is very useful for this dissertation to save study time and save research costs
because this dissertation utilizes available theories regarding the effect of the military
expenditure on the economic growth.
3.4 Research strategy
When performing academic researches, researchers will use certain study strategies so that they
can gain research findings as their expectations. When researchers choose survey strategy, they
will collect data from representative population to explore their own study issues (Saunders et
al., 2012). If the case study strategy is chosen, they will concentrate much on exploring a case (a
firm or a nation) or cases (firms or nations) to have deep understandings the case or the cases
(Yin, 2009). This research has a study strategy, mainly case study strategy because it
concentrates much on investigating the influence of military expenditure on economic growth of
the single case – the US. In addition, the case study strategy will help this research to explore
research aspects in detail. Indeed, focusing much on a single case will create good conditions for
this research to explore how the military expenditure affects the economic growth of the US in
the detail ways (Kohlbacher, 2006).
3.5 Research method
When performing a research, a researcher will use mixed research methods, qualitative research
method or quantitative research method to investigate his or her research matters according to
their desires. With mixed research method, a researcher will use both quantitative data and
qualitative information to investigate his or her research matters (Tashakkori and Teddlie, 2010).
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On the other hand, a researcher who uses qualitative method will use qualitative information to
investigate his or her research matters (Saunders et al., 2012). With the quantitative research
method, a researcher will use quantitative data to investigate his or her research matters (Biggam,
2008). This research applies the quantitative research method because it uses the quantitative
data to analyse how military expenditure affects the economic growth of the US. Due to the
quantitative research method, all research matters will be investigated in the reliable ways to
create reliable research findings that can be used in the practice of the US (Saunders et al., 2012).
In addition, the quantitative research method is extremely related to examining the correlation
amongst factors. The objective of this research is about examination of the military expenditure
affects the economic growth of the US. Thus, the quantitative research method should be chosen
by this research.
3.6 Data source
A secondary data source is used by this research to analyse how military expenditure affects the
economic growth of the US. There are four main rationales for choosing the secondary data
source as a single research data, that is, (1) it saves the data collection time, (2) it reduces the
data collection costs, (3) it rejects the geographical problem during the data collection process,
and (4) the researcher can evaluate and choose suitable secondary data to achieve research aim
before using the secondary data (Saunders et al., 2012). The secondary data of this research will
be collected from websites, organisational reports, journals and other academic resources. To
collect the information regarding military expenditure of the US and GDP of the US, this
research focuses much on such information at the website of the government of the US, that is,
http://www.usgovernmentspending.com/ because the website is very reliable website offering the
information regarding military expenditure of the US and GDP of the US.
3.7 Limitations of used research methodology
There are three main limitations of the applied study method. Firstly, this research’s deduction
approach cannot help this research to have an alternative explanation for research findings (Yin,
2009; Gill and Johnson, 2010). Secondly, this research’s case study strategy cannot ensure the
research findings’ generalization for all nations in the world because it only focuses much on
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exploring research issues of a single case – the US (Yin, 2009). Finally, this research only uses
secondary data to analyse how military expenditure affects the economic growth of the US.
This chapter has indicated rationales for choosing positivism philosophy, deduction approach,
case study strategy, quantitative method, and secondary data. In addition, this chapter has
presented research ethics and the limitations of used research methodology by this research. The
next chapter will indicate analyses of the impact of military expenditure on the economic growth
of the US. In addition, the next chapter will compare and contrast this research’s findings to
earlier studies’ study findings.
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CHAPTER FOUR: FINDINGS, ANALYSIS AND DISCUSSION
This chapter is about analysis of the impact of military expenditure on the economic growth of
the US. This chapter indicates military expenditure of the US. In addition, this chapter compares
and contrasts this research’s findings to earlier studies’ study findings so that it can indicate
similarities and differences amongst this research’s findings to the earlier studies’ study findings.
4.2 Military expenditure of the US
According to Gerace (2002) and Heo (2010), in the current period, this nation has focused much
on developing its military forces and this thing proves its national strengths for nations in the
world. The US will protect its national security when it has strong military force. Indeed, this
nation will protect its national security when it prevents threats from other nations. This nation
has had a large budget for developing its military force and it is regarded as one of the nations
with the great military strength in the world (Boscarino et al., 2003). Since 2001, the US has
started focusing much on its military aspects so that it can protect its national security (CNN
News, 2011). There are five national expenditure types that the US government focuses much on
managing, that is, (1) pension expenditure, (2) health care expenditure, (3) educational
expenditure, (4) defense expenditure, and (5) welfare expenditure because the five national
expenditure types are very important for the US to ensure its political stability and its economic
growth (Fuchs, 2013). The military expenditure of the US in 2015 compared with other national
expenditures of this nation is indicated in table 1 and figure 1.
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Table 1: Types of national expenditures of the US in 2015
Total Spending $6.4 trillion
Pensions $1.2 trillion
Health Care $1.4 trillion
Education $1.0 trillion
Defence $0.8 trillion
Welfare $0.5 trillion
Source: Usgovernmentspending.com (2016a)
Figure 1: Types of national expenditures of the US in 2015
Source: Usgovernmentspending.com (2016a)
From the table 1 and figure 1, in 2015, defense expenditure accounted for 13% of the total
national expenditure while pension expenditure, health care expenditure, educational expenditure
and welfare expenditure accounted for 63% of the total national expenditure. Although the
military expenditure of the US in 2015 reduced, the defense expenditure accounted for the large
part of the total national expenditure. Thus, the US had the high focus on its military issues. A
nation will protect its security from external aggression of other nations when it has a strong
military force. Indeed, nations will not have the intention to conduct aggression of a certain
nation when this nation proves its military strengths. In fact, nations in the world will not have
the intention to conduct aggression of the US because this nation has a very strong military force.
In fact, the US has the strong military force that makes other nations to reject the intention
21

related to aggression. The strong military force is a pride of this nation (Ando, 2009). In short,
there are many researchers including Gerace (2002) and Heo (2010), military of the US plays a
high importance in protecting its nation security and in preventing external aggression for this
nation.
In 2015, the US government focused much on using its national budget to spend governmental
pensions, government health care, governmental education, national defense, and governmental
welfare. The percentage rates of these expenditures in GDP in 2015 of this nation are indicated
in table 2.
Table 2: The percentage rates of national expenditures in GDP
National expenditure types % of GDP
Governmental pensions 7% GDP
Governmental health care 8% GDP
Governmental education 6% GDP
National defense 4% GDP
Governmental welfare 3% GDP
All other spending 8% GDP
Total governmental spending 36% GDP
Source: Usgovernmentspending.com (2016b)
4.3 Impact of military expenditure on the economic growth of the US
Based on the data from the website of usgovernmentspending.com, this research explores
whether there is an impact of military expenditure on economy growth of the US during the
period of 2006 to 2015. The military expenditure of the US from 2006 to 2015 is indicated in
figure 2 and GDP growth of the US from 2006 to 2015 is indicated in figure 3.
22

Figure 2: Military expenditure of the US from 2006 to 2015
Source: Usgovernmentspending.com (2016c)
From the figure 2, military expenditure of the US from 2006 to 2011 increased while military
expenditure of the US from 2012 to 2015 reduced. In particular, during the period of 2006-2011,
the policy of the US government was to focus much on military aspects so that it could increase
its military strengths to avoid the situation of the external aggression. During the period of 2012-
2015, the US started reducing its military expenditure because this nation created its strong
military force during the period of 2006-2011.
23

Figure 3: GDP of the US from 2006 to 2015
Source: Usgovernmentspending.com (2016d)
From the figure 3, GDP of the US from 2006 to 2008 increased. However, GDP of the US in
2009 reduced compared with 2008 and the reduction in GDP of this nation in 2009 was caused
by the global economic crisis. GDP of the US from 2010 to 2015 increased. From the figure 2
and the figure 3, this research explores that the decrease or the increase in GDP of the US do not
have any link with the decrease or the increase in military expenditure. Indeed, during the period
of 2006 to 2011, there was an increase in military expenditure of the US while GDP of the US
increased from 2006 to 2008 but reduced in 2009 and increased from 2010 to 2011. During the
period of the 2012 to 2015, there was a decrease in military expenditure of the US while GDP of
the US increased during the period of 2012-2015. Thus, the increase or the decrease of military
expenditure of the US during the period of 2006 to 2015 does not have any impact on the GDP
growth of the US.
In addition, to prove whether there is the relationship between military expenditure and
economic growth in the US, a linear regression analysis method is used in this research. In
particular, when p-value (sig.) is smaller than 0.05, there is the relationship between military
expenditure and economic growth in the US. On the other hand, when p-value (sig.) is higher
than 0.05, there is not the relationship between military expenditure and economic growth in the
US (Dewberry, 2004). The SPSS software is used for examining the relationship between
relationship between military expenditure and economic growth in the US. From
24

Usgovernmentspending.com (2016c) and Usgovernmentspending.com (2016d), the data related
to military expenditure and GDP growth of the US are indicated in table 3.
Table 3: Military expenditure and GDP growth of the US
Year GDP – USD trillion Military expenditure – USD trillion
2006 13.8559 0.62
2007 14.4776 0.65
2008 14.7186 0.73
2009 14.4187 0.79
2010 14.9644 0.85
2011 15.5179 0.88
2012 16.1553 0.85
2013 16.6632 0.82
2014 17.3481 0.8
2015 17.947 0.8
Source: Usgovernmentspending.com (2016c) and Source: Usgovernmentspending.com
(2016d)
From the data about GDP and military expenditure of the US in table 3, this research uses the
SPSS software to examine the relationship between GDP growth and military expenditure in the
US and GDP is regarded as the dependent variable and the military expenditure is regarded as
the independent variable. The result of the linear regression analysis method is indicated in table
4.
25

Table 4: Coefficients of the model including GDP and military expenditure in the US
Standardized
Unstandardized Coefficients Coefficients
Model B Std. Error Beta t Sig.
1 (Constant) 9.032 3.713 2.433 .041
Military expenditure 8.439 4.740 .533 1.780 .113
From the table 5, p-value of the military expenditure is 0.113 that is higher than 0.05. This means
that there is not any impact of military expenditure on economy growth of the US during the
period of 2006-2015. Indeed, the p-value (sig.) which is higher than 0.05 reflect the non-
relationship between two factors. In the case of the US, the increase or the decrease of the
military expenditure of the US does not cause the increase or the decrease of the economic
growth of this nation.
In short, in the chapter two, Heo (2000) confirmed that military expenditure did not have any
impact on economic growth of the US during the period of 1948-1996, Gerace (2002) confirmed
that military expenditure did not have any impact on economic growth of the US during the
period of 1951-1997 and Heo (2010) confirmed that military expenditure did not have any
impact on economic growth of the US during the period of 1954-2005. Based on the data from
the website of usgovernmentspending.com, this research explores that there is not any impact of
military expenditure on economy growth of the US during the period of 2006 to 2015. Thus,
based on research previous researches and the regression analysis method for the relationship
between military expenditure and economic growth (GDP growth), this research confirms that
there is not any impact of military expenditure on economy growth of the US. In other words, the
economic growth of the US is not determined by the military expenditure of this nation.
4.4 Discussion of research findings
This research explores that there is not any impact of military expenditure on economy growth of
the US. The research findings are similar with previous studies including Alexander (1990) and
Aye et al. (2014) because the previous studies agree that there is not any impact of military
26

expenditure on economy growth of nations. In particular, the previous studies indicate that
military expenditure helps a nation to develop its military force to protect its security from
external aggression rather than reducing or increasing economic growth of the nation. In
addition, a nation has its own budget that is used for many national aspects such as military
expenditure, health care expenditure, welfare expenditure, pension expenditure, educational
expenditure, public infrastructure expenditure, etc. and a suitable military expenditure cannot
have any impact on economic growth of the nation. Indeed, for the US, its military expenditure
helps this nation to develop its military force to protect its security from external aggression
rather than reducing or increasing economic growth of the nation. This nation has had a suitable
national budget for all its national aspects such as military expenditure, health care expenditure,
welfare expenditure, pension expenditure, educational expenditure, public infrastructure
expenditure and then, the economic growth are decided by many aspects rather than each issues
related to its military expenditure.
This research recognizes that military expenditure does not have any effect on economy growth
of the US. The research findings are different from previous studies including Cappelen et al.
(1984), DeRouen (1994), Dunne (2002), Kollias et al. (2004), Yang et al. (2011), Chang et al.
(2011), Dunne and Tian (2013), Pradhan et al. (2013), Pan et al. (2014), Chang et al. (2014) and
Korkmaz (2015) because the previous studies reflect that military expenditure has a negative
influence on economic growth of nations. In particular, the previous studies indicate that
increased military expenditure retards the economic growth. The higher level of military
expenditure implies a lower level of domestic savings, a lower level of private investment, a
lower level of aggregate demand and a lower level of consumption. The higher level of military
expenditure will result in increased interest rate that will reduce the private investment, will
reduce domestic savings, and will reduce aggregate demand that will lead to low consumption.
R&D activities, public infrastructures and public education are often regarded as public goods
which have a positive influence on the economy growth. By contrast, government spending that
focuses much on non-productive aspect (development of military force) will lead to a decrease in
income growth. In other words, governments that have a great focus on financing military sector
will have a reduction in economic growth. However, in the case of the US, the costs for military
are suitable, and other aspects such as pension expenditure, health care expenditure, educational
27

expenditure, and welfare expenditure are planned suitably. Then, the US economic growth is
decided by many factors rather than military expenditure.
This research reflects that there is no correlation between military expenditure and economy
growth of the US. The research findings are not similar with previous studies including
Wijeweera and Webb (2011), Lee and Chen (2007) and Yildirim et al. (2005) because the
previous studies reflect that military expenditure has a positive influence on economic growth of
nations. In particular, the previous studies indicate that increased military expenditure
encourages demand, enhances purchase power, creates positive externalities and increases
national output. For example, an increase in military expenditure will lead to many jobs for
citizens in a nation and the positive employment impact of defense spending boosts aggregate
demands in the economy of this nation. Defense industry is a source of substantial technologic
innovation in a nation and has increase the growth of private sector. This is the way to develop
the economy of this nation. In addition, military expenditure has a high contribution to retain
both internal security and political stability that is very important for economic activities of a
nation. Indeed, a secure environment can also attract enhance economic exchanges, and attract
higher foreign direct investments, which both have high contributions to economic growth of a
nation. However, in the case of the US, there is not any impact of military expenditure on
economy growth because this nation has a large budget for all its national issues including
military force aspect. The costs for military compared with other aspects such as pension
expenditure, health care expenditure, educational expenditure, and welfare expenditure are
suitable and the US economic growth is decided by many factors rather than military
expenditure.
This chapter has analysed the impact of military expenditure on the economic growth of the US.
In addition, this chapter has compared and contrasted this research’s findings to earlier studies’
study findings so that it can indicate similarities and differences amongst this research’s findings
to the earlier studies’ study findings. This chapter explores that there is not any impact of
military expenditure on the economic growth of the US. The next chapter will summarize all
research results, will express research contributions, will describe study limitations and will
28

suggest recommendations for the US government to increase the security of the US and to
enhance the economic growth of the US in the future.
29

CHAPTER FIVE: CONCLUSION AND RECOMMENDATION
This chapter is crucial for the researcher to summarize all research results, to express research
contributions, and to describe study limitations. In addition, this chapter suggests
recommendations for the US government to increase the security of the US and to enhance the
economic growth of the US in the future.
5.2 Research conclusions
The overall aim of this research is to analyse the effect of military expenditure on the economic
growth of the US. In particular, this research has three main research objectives as follows: (1) to
review the main theories regarding the effect of military expenditure on the economic growth in
nations, (2) to analyse how military expenditure affects the economic growth of the US and (3)
to suggest recommendations for the US government to increase the security of the US and to
enhance the economic growth of the US in the future. This research completes all research
objectives and the overall research aim. The following conclusions prove the achievement of all
research objectives and the overall research aim.
First, this research has reviewed the impact of military expenditure on the economic growth of
nations. This research has explored that military expenditure has negative impacts on the
economic growth of some nations while it has positive impacts on the economic growth of other
nations. Therefore, dependence on the different context of nations, military expenditure can have
negative impacts or positive impacts on the economic growth of the nations. Hence, this research
achieves the first research objective.
Second, this research explores that there is not any impact of military expenditure on the
economic growth of the US. Indeed, this nation has had a suitable national budget for all its
national aspects such as military expenditure, health care expenditure, welfare expenditure,
pension expenditure, educational expenditure, public infrastructure expenditure and then, the
economic growth are decided by many aspects rather than each issues related to its military
expenditure. Hence, this research achieves the second research objective.
30

Last, in this chapter, this research suggests recommendations for the US government to increase
the security of the US and to enhance the economic growth of the US in the future. Then, this
research achieves the last research objective. The achievement of all research objective means
that this research achieves the overall research aim.
5.3 Research contributions
This research has three main research contributions. The first research contribution is that it
helps the US government to know the importance of its military force in preventing external
aggression in the US. The second research contribution is that it helps other nations to know the
importance of their military forces in external aggression in their nations. The third research
contribution is that it increases the amount of literature in terms of the relation amongst military
expenditure and economy development in the case of the US and then, other researchers can
make references of this research to have deep understandings about the relation amongst military
expenditure and economy development in the case of the US.
5.4 Research limitations
This research has three main research limitations. The first research limitation is that this
research only explores the relation amongst military expenditure and economy development in
the case of the US. The further study should investigate the relation amongst military
expenditure and economy development in the other nations such as Japan, China, Russia, etc. to
compare the relation amongst military expenditure and economy development in these nations.
The second research limitation is that this research only investigates the relation amongst
military expenditure and economy development in the case of the US. The further study should
investigate other factors impacting on economy development in the case of the US such as
educational expenditure, health care expenditure, pension expenditure, welfare expenditure, etc.
The last research limitation is that this research only uses secondary data to explore the relation
amongst military expenditure and economy development in the case of the US. The further study
should explore the relation amongst military expenditure and economy development in the case
of the US by applying both secondary data and primary data.
31

5.5 Recommendations
This research has three main recommendations for the US government increase the security of
the US and to enhance the economic growth of the US in the future as follows:
First, the US government should have suitable plan for the US military spending so that the US
government can ensure that the US military force is good to prevent external aggression. Indeed,
in current period, political stability will create good conditions for the US to increase its
economic growth through conducting international economic exchanges and attracting foreign
direct investments. Then, it is important for the US government to retain strong military force to
ensure its political stability and its national security.
Second, the US government should ensure the suitability between the US military expenditure
and other national expenditures such as education expenditure, health care expenditure, pension
expenditure, welfare expenditure, public infrastructure expenditure, etc. so that the US can
develop economic growth in the highest way. Indeed, the US government should not pay too
much attention to the US military force and should not ignore US health care sector
development, US educational sector development, US public infrastructure development, etc.
This will be a good way for the US government to ensure its military strength and to ensure the
US economic growth in the future.
Last, the US government should keep a serious track of changes in the political changes in the
world so that the US government can forecast the impact of political changes on the US
economic growth and the US security. The US government should have suitably available
solutions for these political changes in the world and should increase the US education sector
development so that the US can increase the quality of human capital to increase the US
economic growth in the future.
This chapter has summarized all research results, has expressed research contributions, and has
described study limitations. In addition, this chapter has suggested recommendations for the US
government to increase the security of the US and to enhance the economic growth of the US in
32

the future. However, changes in military expenditure and changes in economic growth of the US
will occur in the next ten years. Then, it is important for other studies to explore the impact of
military expenditure on economy development of the US in the next ten years.
33

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