The Defense-Growth Relationship: An Economic Investigation into Post-Soviet States

Abstract

An important question stemming from the collapse of the Soviet Union is how defense spending has influenced the economic performance of the 15 member states since their establishment as market economies. This study furthers the understanding of the relationship between defense spending and economic growth using data from the states of the former Soviet Union from 1992 to 2007. A nonlinear production function was used for direct effects, and models of investment and employment were employed for indirect effects. Contrary to expectations, the findings show that continued reliance on the defense sector in post-Soviet states has helped overall economic growth. Similarly, the growth effect of defense spending has remained nearly constant since the collapse of the Soviet Union.