Military technology and the North Korean economy: evidence from time-series data

Abstract

The causal effect of military variables on economic growth has been investigated for North Korea, using time-series data over the period 1994–2017. Regression models were constructed with three military variables that include military burden (MB), arms trade openness (ATO) and missile dummy as a proxy for technological progress in the military sector. Although military technology has been highly developed in North Korea, non-military industrial development is far behind other developing countries. The regression results show that the military variables have negative and significant effects on economic growth. The Granger causality test further confirms the causal directions from MB to economic growth, the ATO measure shows a feedback effect on economic growth, while the causal effect of missile dummy is not strong enough to be significant. The results are, in general, consistent with our proposition that military technology would not have a spillover effect on non-military industrial sectors in North Korea.