Abstract
Undeniably, peace and long-term sustainable economic development are the prime agenda of all countries. This study aims to empirically evaluate the impact of military spending on economic growth for a panel of 35 non-OECD countries over 1988–2019. A multivariate regression model based on the augmented production function is used to achieve the objective of the study. The panel autoregressive distributed lag (ARDL)/pooled mean group (PMG) technique is employed, while, in addition the robust least squares and fixed-effect estimators are implemented for the robustness of the results. This study found a clear negative effect of military spending on economic growth. The pairwise Dumitrescu Hurlin panel causality test results exhibit bi-directional causality between military expenses and economic growth. Overall, these estimates provide strong support that military expenditure is not beneficial rather detrimental to economic growth. The empirical findings of this study suggest that policymakers need to redesign the military budget to stimulate economic growth and improve social welfare.
Highlights
The assessment of the economic and social effects of military expenditure remains an interesting desirable area of research
Panel unit root tests (PURTs) Before the formal empirical exploration of the panel data, it is essential to have an understanding of the integrating properties of the data
Empirical results indicating that a 1% upsurge in military expenditure will dampen economic growth by 0.3223%
Summary
The assessment of the economic and social effects of military expenditure remains an interesting desirable area of research. There is a substantial volume of literature about the economic consequences of military expenditure; no consensus has been developed, whether military spending is beneficial or detrimental to economic growth. Military spending according to the Keynesian approach is a component of government consumption, which stimulates economic growth by expanding demand for goods and services. When aggregate demand is lower relative to prospective supply, rises in military spending tend to enlarge capacity utilization, raise profits, and enhance investment and aggregate output (Faini et al, 1984). In a study conducted by Lobont et al (2019), it is ascertained that military spending has several positive effects on capital, labor, growth, and the effectual use of available resources in the economy as a whole
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