Impacts of military expenditure and institutional quality on inclusive growth in BRICS countries.
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Date
2019
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Abstract
This study investigated the relationship between military expenditure, institutional
quality and inclusive growth in BRICS countries from 1970 to 2017. The increase in
military expenditure by BRICS and the worsening inclusive growth indices such as
unemployment, inequality, poverty, among others, necessitated the assessment of the
relationship between military expenditure, institutional quality and inclusive growth in
the BRICS countries. The study was carried out under three modular themes, which also
form the objectives of the study, namely; the determinants of military expenditure,
computation of inclusive growth index for the BRICS and the effects of military
expenditure and institutional quality on the inclusive growth index of the BRICS
countries. Panel data analysis was applied for the first objective, the Z-score technique
was used for the second objective, which involved the computation of inclusive growth
index for BRICS. The third objective was analysed using the Auto-Regressive
Distributed Lags ARDL for BRICS countries by using times series data. The results
obtained on the first objective revealed that BRICS military expenditure was
significantly and majorly determined by Gross Domestic Product (GDP), trade
balance, security web and inflation rate for the period under analysis. The results on
Objective 2 revealed that the average inclusive growth index for Russia was the highest
among the five BRICS countries, followed by China and Brazil. However, South Africa
and India fell below the average inclusive growth index computed for BRICS. The
results on Objective 3 showed that the impacts of military expenditure and institutional
quality on inclusive growth varied among the BRICS countries. From the literature, the
most effective way of assessment is to focus on the impact of the interactive form of
military expenditure and institutional quality. Findings revealed that the interactive form
of military expenditure and institutional quality (MCP) only have significant impact on
inclusive growth of Russia because the coefficient is positive and significant. The
coefficient is negative and significant for China and South Africa while the same
coefficient is not significant at all in Brazil and India. This implies that Russia is the
only country in the BRICS where the interaction of military expenditure and institutional
quality supports inclusive growth. Notwithstanding, other control variables such as
education and population have statistically significant effects on inclusive growth in
Brazil, China and South Africa. Results on India emerged as a complete outlier among
the five as none of the variables, including the control variables was found to have a
statistically significant relationship with inclusive growth. Again, the efforts in this study
included a comparison of the inclusive growth results with those of economic growth
and per capita income which have been used by previous studies to investigate the effect
of military expenditure on the BRICS economy. The results showed that findings under
the Inclusive Growth Model were the same for that of economic growth and per capita
income for Russia, China and South Africa. However, there are some differences firstly;
the negative effect of the interaction of military expenditure and institutional quality in
Brazil which is significant on inclusive growth is not significant on economic growth
and per capita income. This shows that the adverse effect of this variable was more felt
on inclusive growth than economic growth in Brazil. Again, military expenditure and
institutional quality showed a positive significant impact on India’s economic growth
and per capita income, but the effect on inclusive growth was not significant. Finally,
levels of investment in all the countries have shown significant positive impacts on
economic growth and per capita income, but the current levels of investments in the
BRICS fail to drive inclusive growth significantly except in Russia. These results further
confirmed that assessment of the impacts of military expenditure and institutional
quality using economic growth and not inclusive growth might be misleading. Based on
the findings from this study, the following recommendations are made: First, there is the
need for improvement of synergy between military expenditures and institutional quality
before the challenge of inclusive growth in the BRICS can be tackled effectively.
Second, prioritising inclusive growth more than economic growth is more germane to
the assessment of the effectiveness of military expenditure.
Description
Doctoral Degree. University of KwaZulu-Natal, Pietermaritzburg.