Military Expenditure, Arms Sanctions and the Technology Innovation

• In Event: Poster Session: Urban Politics & International Order, Environmental Issues, and IPE
  In Poster Session: Poster Session: International Order, Environmental Issues, and IPE

Abstract

This paper examined the impact of military expenditure on technology innovation. The existing literature dealing with defense spending and economic growth, or technological innovation has produced conflicting empirical findings. While there are many inferences about this inconsistent trend in the literature, I argue that this aspect is due to different aspects of defense spending by countries and time. An incremental portion of the military expenditure can be disaggregated by two main bodies, the cost of augmenting a new weapons system and increasing the number of existing military forces. From a technological innovation perspective, the former body of the military expenditure (e.g. military R&D, arms transfer) may act as the determinant for technological innovation at a national level, while the latter (e.g. increase in the number of troops or wages) is unlikely to act as a determinant of new technological innovation. I conduct two-stage least squares(2SLS) approach by applicating the imposition of the arms sanction as an instrumental variable. The arms sanctions constrained the target countries’ arms transfer or related technology and as a result, the military expenditure is likely to be biased to an increase of supplementing existing military forces. By accounting potential endogenity of the military expenditure, I found empirically robust results that the military expenditure increment under the arms sanctions has a negative impact on national technology innovation.

Author

• Young Jun Choi, Yonsei University