Abstract
ABSTRACT This study investigates the relationship between defense spending and societal welfare in G7 nations, focusing on health, education, and consumption expenditure as indicators of national well-being. Utilizing panel data from 1971 to 2022, we employ fixed effects to study the short-run and utilized DOLS/FMOLS econometric methods which address issues such as unobserved heterogeneity, non-stationarity, and serial correlation for long-run estimates. Incorporating a comprehensive set of control variables enhances the reliability of our analysis, our findings indicate a significant positive impact of military expenditure on health, education, and final consumption expenditure. Robustness checks confirm these results even after controlling for additional factors such as tax-to-GDP ratio, GDP per capita, trade, demographics, and historical events. Contrary to some prior studies, our findings suggest that defense spending positively influences national well-being.
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