The impact of American and British involvement in Afghanistan and Iraq on health spending, military spending and economic growth

Had there been no involvement in Afghanistan and Iraq, how much lower would military and health spending have been in the US and the UK? And what is the total effect of war on real output variations as compared with its counterfactual? We use a synthetic control method and find that while the UK and...

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Bibliographic Details
Published in:The B.E. journal of macroeconomics 2014-01, Vol.14 (1), p.325-325
Main Authors: Bove, Vincenzo, Elia, Leandro
Format: Article
Language:English
Subjects:
Afghanistan
Defense spending
Economic growth
GDP
Gross Domestic Product
Health care expenditures
Impact analysis
Iraq
Military expenditure
Output
Studies
United Kingdom
United States
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Summary:Had there been no involvement in Afghanistan and Iraq, how much lower would military and health spending have been in the US and the UK? And what is the total effect of war on real output variations as compared with its counterfactual? We use a synthetic control method and find that while the UK and the US have experienced similar relative increases in health spending, especially towards the end of the 10-year window, the effect on military spending is much more pronounced in the US. We find that the combined cumulative costs amount to more than 17% of the US GDP and more than 9% of the UK GDP. Moreover, there are no robust signs of a convergence between the true and counterfactual levels of military spending while health spending shows a level shift in the last 5 years in both countries. Finally, there is no evidence of changes in the national income following the sharp increase in defense spending.
ISSN:2194-6116
1935-1690
DOI:10.1515/bejm-2013-0097