Defense spending and economic growth: evidence from China, 1952–2012

Abstract

This paper examines whether defense expenditures contributed to economic growth in China for the 1952–2012 period. We examine the contribution of defense to economic growth using recently published official data on economic activity, defense, and government expenditures. We employ the Feder-Ram and augmented Solow models of economic growth to explore the defense-growth relationship. The Feder-Ram model appears to poorly explain economic growth in China. The augmented Solow model suggests, however, that a 1% increase in defense expenditures raises the economic growth rate by approximately 0.15–0.19%.