Volume 7, Number 1, June 2017
| Defense and Social Welfare Expenditures’ Effects on Taiwan’s Economic Growth (1964-2015) |
Johnny Shaw¹, Hsiao-Yun Yu², Yen-Wei Hsieh³, Chien-Wen Wang 4
Abstract
In national fiscal expenditures, there used to be controversial discussions on the trade-off relations between military security and social welfare development. Most empirical researches merely focus on the single effect of defense expenditure or social welfare expenditure on economic growth but few on the tri-integrated research of the causal relationships among defense expenditure, social welfare expenditure and economic growth performance. This paper utilizes the Unit Root Test and Granger Causality Model to measure and discuss the causal relationships among defense expenditure, social welfare expenditure and economic growth of Taiwan from 1964 to 2015. The results show there is a bilateral negative feedback causal relationship between economic growth and defense expenditure and Taiwan has to ensure its national security, social stability and stable economic growth while facing China’s long-term military threats and provocations. Its enlarged defense budget has created a phenomenon of defense expenditure increase with economic growth. Moreover, creasing defense expenditure intensifies domestic circumstances, reduces market- purchase intention and indirectly affects investment. Such negative feedback relationship seems to echo related researches that have shown the non-linear relationship between the two factors. This paper’s empirical data has demonstrated that there is non-significant causal relationship between social welfare expenditure and economic growth.
Keywords: Defense Expenditure, Social Welfare Ex penditure, Economic Growth, Granger Causality Test, Performance Measurement
¹ Department of Public Administration & Management, Chinese Culture University, Corresponding Author
E-mail: jshaw@faculty.pccu.edu.tw
² Department of Financial Management National Defense University
³ Department of Financial Management National Defense University
4 Research Center for Humanities &Social Sciences, Academia Sinica