Military Expenditure as Productive Public Investment for Economic Growth: An Assessment of Bangladesh Economy
This paper proposes a neoclassical labor augmenting extended Solow growth model in the presence of military and non-military expenditure under the assumption of productive government spending. We derive the theoretical model based on National Income Accounting Framework and through steady-state equations common to Solow-styled growth models. Based on the theoretical foundation, the empirical model estimates the sole impact of military expenditure on the economic growth of Bangladesh using data from 1973 to 2019. The Vector Error Correction Model estimates exhibit no significant long-run relationship between economic growth and military and non-military expenditures, while the short-run effect is bi-directional, negative, and statistically significant. The study empirically concludes that military expenditure is not a productive public investment and that an increase in allocation for the military budget may dampen the growth performance of Bangladesh. The same conclusion applies to non-military expenditure too.