The effect of the military on economic growth has been an important issue among specialists in economic and political development, but the relationship between them has not been fully formulated. The key is to examine the role of the state. The military as an institution has a positive effect on economic growth through effective and strong state involvement in the economy. Though the data at first do not seem to support this hypothesis, an analysis that separates the cases into two groups of less-developed countries (LDCs) works well with the data from relatively rich ones, but not with the data from the relatively poor ones. Thus, greater internal power for the military leads to successful economic growth through state's effective and strong involvement in economic affairs only for relatively rich LDCs. A nonadditive model is an appropriate specification for testing this hypothesis.
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