MILITARY EXPENDITURE AND ECONOMIC GROWTH IN MIDDLE EASTERN COUNTRIES: A DYNAMIC PANEL DATA ANALYSIS

Abstract

Defence expenditures have both costs and benefits to the economy. The costs of defence expenditures are mainly emphasized as opportunity costs. On the other hand, defence spending may have growth‐promoting potential benefits: a rise in defence spending may result in a higher aggregate demand, production and employment. This paper examines empirically the effects of military expenditures on economic growth for Middle Eastern countries and Turkey, for the time‐period 1989–1999. The relationship between military expenditure and economic growth is investigated by using cross‐section and dynamic panel estimation techniques. Empirical analysis indicates that military expenditure enhances economic growth in the Middle Eastern countries and Turkey as a whole.

Keywords:

• Military expenditure
• Economic growth
• Defence economics
• Dynamic panel data analysis

Notes

† An earlier version of this paper was presented at the 7th Annual Conference on Economics & Security, University of the West of England, Bristol, 26–28 June 2003.

¹ Please see Sandler and Hartley (1995) and Ram (1995) for comprehensive empirical literature.

² Please see the appendix for the data sources and countries included in the analysis.

³ Please see the appendix for sources of data and income groupings.

⁴ In order to conserve space, estimates of equation (2) are not reported here, as they do not hold any additional information.

World Bank Development Indicators (various years).

Additional information

Notes on contributors

Jülide Yildirim†

† An earlier version of this paper was presented at the 7th Annual Conference on Economics & Security, University of the West of England, Bristol, 26–28 June 2003.