Growth and defense in developing countries: the case of Greece

Abstract

The relationship between defense spending and economic growth is a subject of considerable importance especially for underdeveloped and developing economies. In this paper we investigate the trade-offs between defense spending and growth in Greece during the period 1958-1987. Our results indicate that the levels of defense burdens were detrimental to economic growth of the country. The trade-off was mainly between military spending and public investment whereas foreign capital inflow was not enough to offset the negative effects of progressive defense burdens.