The Relationship between Military Expenditures and Economic Freedom in the Middle East and North Africa Region

Abstract

The relationship between military expenditures and economic growth has been widely studied in the literature. However, there are no studies focusing on the relationship between military expenditures and economic freedom in the literature. In countries with high levels of economic freedom, democratic regime transitions are more comfortable. Therefore, military expenditures are expected to decrease as potential internal turmoil, and external threats will be reduced in countries with high economic freedom. This study examines the relationship between military expenditures and economic freedom in 13 MENA countries (Algeria, Bahrain, Egypt, Iran, Israel, Jordan, Kuwait, Lebanon, Morocco, Oman, Saudi Arabia, Tunisia, and Turkey) during the period 1996-2018 by using panel data analysis. It was found that economic growth, tax burden, and trade freedom had a positive impact on military expenditures. It was also concluded that property rights, monetary freedom, government integrity, and investment freedom negatively affected military expenditures. Besides, it is understood that there is a bidirectional causal relationship between military expenditures and tax burden, property rights, monetary freedom, government integrity, investment freedom, and business freedom. On the other hand, there is a unidirectional causality relationship from economic growth to military expenditures and from military expenditures to trade freedom.