Military spending and spillover effect on social welfare

Abstract

The Malaysian Ministry of Finance primarily aims to implement fiscal and financial policies for perpetual economic progress. It is vital to ensure the equitable distribution of national wealth to improve Malaysian citizens’ well-being. Based on this study, the Malaysian government’s strategy in defence allocation and spending demonstrates spillover effects on social welfare. Notwithstanding, this financial strategy must be self-sufficient in terms of resources to achieve economic scale through increased job creation and income generation. The current work utilised panel data to examine the defence spending effects on social welfare. A key finding was derived by applying the Autoregressive Distributed Lag (ARDL) model to fiscal time series data for 15 years (2008–2022). Specifically, defence allocations and expenditures reflected a spillover effect on social welfare. The empirical outcomes potentially catalyse the development of the National Defense White Paper in defence allocation and spending strategies and establish a novel independent paradigm in the National Defense Industry (NDI).