To discover defense-growth nexus, this study has used Feder type model to capture the supply-side impacts for Pakistan and India. In Feder-type model, this study has used four sectors to find out total effects of defense spending on growth by using OLS technique. The findings of the study show that there is positive association between the total effect of defense and growth in all the sectors for both the countries. In augmented Feder type model, the total effects along with externality effects and productivity differential have been re-estimated. The sign of the total effects of defense sector remain the same for both the countries whereas externality effects of defense sector have been observed negative for both the countries except in four-sector for Pakistan. The results of productivity differential of defense sector appear with negative sign throughout the analysis
Defense expenditures, Economic growth, Pakistan, India, Feder Model
Journal of Economic Literature Subject Codes
H56, O40, B23
Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.
Sheikh, M. R. (2014). Defense expenditures and economic growth in Pakistan and India: An augmented Feder-type model. Business Review, 9(2), 176-197. Retrieved from https://ir.iba.edu.pk/businessreview/vol9/iss2/13
March 30, 2021