The Effects of Military Occupation on Growth

• Published in: Kyklos (Basel) 2019-02, Vol.72 (1), p.183-207
• Main Authors: Vishwasrao, Sharmila, Schneider, Matthew, Chiang, Eric P.
• Format: Article
• Language: English
• Subjects: Defense spending; Economic growth; Military intervention; Military occupations; Occupations
• ISSN: 0023-5962; 1467-6435
• DOI: 10.1111/kykl.12194

Summary A substantial literature exists on the effects of military expenditures on economic growth, yet no study has analyzed the effects of military occupation other than in anecdotal cases. This paper uses a panel of 214 countries from 1950 to 2013 to study how economic growth is impacted by different forms of military occupation. Transformative occupations aim to establish institutions to promote stability once the occupation ends, while subdual occupations are more malevolent in their objectives. Our results show that transformative occupations produce positive growth in occupied countries after the occupation period concludes. Separating these effects into the short run and long run, we find that while countries subject to a subdual occupation experience a short‐run increase in growth at the end of the occupation, countries with transformative occupation experience long‐run increases in growth. These findings are robust to the inclusion of traditional drivers of growth. Policy implications suggest that regional conflicts that are solved using military intervention may have lasting effects on growth as long as the intentions of the occupying force are transformative in nature.