Does military spending stimulate growth? An empirical investigation in Italy

This paper investigates the effect of military burden on economic growth and extends previous works on the optimal size of government expenditure by exploring how external threat affects the preferences of the households and, in turn, economic growth. Post World War II Italian data are used to estimate nonlinear growth models using time-series semi-parametric methods. The estimates show that total government and civilian burdens are productive, whereas, military burden has significant effects on economic growth through the expenditure for peacekeeping missions, which reduces the insecurity in the home country. This may justify economically the current not negligible budget devoted to peacekeeping and humanitarian missions.