Defense R&D, technology, and economic performance: a longitudinal analysis of the US experience

The impact of defense expenditure is discussed in terms of the direct relationships between defense R&D and economic performance as well as the indirect relationships between the development of technical and scientific skills and new technology. The model is estimated for the period 1955-1988 on a time-series set measured as elasticities. The effect of defense R&D is observed through technological change as measured by the number of patents granted to US organizations and individuals. Results indicate no statistically visible evidence of direct effect from defense R&D to the economy. The nonR&D aspect of defense spending appears to have no statistically significant effect on the major components of civilian economic performance, technical skills formation or technological change. From a policy point of view, this suggests that technical spillovers may be limited to a specific kind of defense spending and not to defense spending in general. Another implication is that the rivalry between R&D and nonR&D defense spending favors the latter