Economic Consequences of Military Expenditure: Evidence from Southern Europe and Turkey

Abstract

This paper presents an empirical evaluation of national economic growth and military expenditures. A model that includes military spending and economic growth indicators is used to analyze a panel of countries in the Southern European region and Turkey from 1988 to 2012. Data was obtained from the Stockholm International Peace Research Institute (SIPRI), the World Bank and the Heidelberg Institute for International Conflict Research (HIIK). We found that the primary variables explaining increases in military expenditures in the region are the military expenditures in the previous year, the GDP growth rate and the population growth rate. This paper also focuses on investigating whether military spending is detrimental to developing countries’ economic growth. Our results suggest an increase in military spending is detrimental to low income economies, compared to upper-middle and high income economies.