The Political Economy of Defense Spending in South Korea

Abstract

The collapse of communism in the Soviet Union and Eastern Europe, as well as developments surrounding peace talks in the Korean peninsula, have led to public demands in South Korea for reductions in defense spending. Those favoring cutbacks argue that reductions in defense spending will stimulate a `peace dividend'. The opposition points to the recent nuclear crisis with North Korea as evidence of the need to maintain or even increase current levels of military spending. According to this argument, defense cutbacks are premature in view of existing threats to national security. In this study, I evaluate both sides of the argument by examining the impact of defense spending on economic growth on South Korea. Overall, the results show that military expenditures have no significant, direct effects on economic growth in South Korea.