Guns for Butter? Empirical Evidence from China. Issue 7 (10th November 2018)

• Record Type: Journal Article
• Authors: Xu, Yingying; Chang, Hsu Ling; Su, Chi Wei; Dumitrescu, Adelina
• Is Part Of: Defence and peace economics. Volume 29:Issue 7(2018)
• Page Start: 809
• Page End: 820
• Publication Date: 2018-11-10
• Subjects: Defence spending -- education expenditure -- rolling window -- bootstrap -- time-varying causality; F42 -- H56 -- O1 -- O53; Military readiness -- Economic aspects -- Periodicals; Disarmament -- Economic aspects -- Periodicals; 338.47355
• DOI: 10.1080/10242694.2017.1293791
• Languages: English
• ISSNs: 1024-2694

Abstract

Abstract: This study examines the causal nexus between defence spending and education expenditure in China using the bootstrap Granger full-sample causality test and sub-sample rolling window estimation. The full-sample result indicates that there is no causality between defence spending and education expenditure. By adopting a time-varying rolling window approach to revisit the dynamic causal relationships, this article identifies a negative unidirectional causality running from education expenditure to defence spending. The finding suggests that it is the education expenditure crowds out defence spending in China rather than reverse. No causality is demonstrated from defence spending to education expenditure, indicating that an increase in military spending will not crowd out expenditure on education. The results could be partly explained by that the education expenditure in China is below the requirement of corresponding economic growth, urging for more financial budget. Whereas the findings support a negative trade-off between defence and education expenditures, they refute the theory of 'guns for butter'.