Military Spending Research Articles

Do budget deficits cause current account deficits? a re-evaluation utilizing military expenditures as an instrumental variable.

The twin deficit hypothesis suggests that budget deficits are crucial factors leading to current account deficits, and substantial empirical evidence documents a significant positive statistical correlation between budget and current account deficits. However, such evidence generally suffers from endogeneity problems due to reverse causality, thereby making it difficult to provide solid evidence to support policy implementation. We use extensive cross-national panel data from developed and developing countries and military expenditure as an instrumental variable to reexamine the impact of budget deficits on the current account and test the validity of the twin deficit hypothesis. Our results demonstrate that budget deficits lead to current account deficits in both developed and developing countries, supporting the twin deficit hypothesis. After considering various factors that may affect the exogeneity of military expenditures, approximating the instrumental variable as exogenous, and performing multiple robustness tests, the hypothesis still holds. This study provides solid evidence supporting the use of fiscal policies to deal with current account imbalances.

Inequality and public opinion on military spending in the United States

AbstractIn this article, I argue that increasing inequality should have an impact on public opinion which balances the impact of military spending in the United States. Using the so‐called “guns versus butter trade‐off” argument, I show that, as inequality increases between those at a lower income level and those at the upper end of income, the public may view social spending as too small and military spending as too large. In response, the public should act less favorably to expenditure on the military. An empirical test of the effect of inequality on public support (since the 1980s) of military spending, in which I employ public opinion data, confirms my expectations: widening inequality engenders a negative impact on public support for defense expenditures.

Building cybersecurity resilience: integrating defense and recovery investment strategies in an expected resilience framework

PurposeTo remain competitive in an unpredictable environment where the complexity and frequency of cybercrime are rapidly increasing, a cyber resiliency strategy is vital for business continuity. However, one of the barriers to improving cyber resilience is that security defense and accident recovery do not combine efficaciously, as embodied by emphasizing cyber security defense strategies, leaving firms ill-prepared to respond to attacks. The present study thus develops an expected resilience framework to assess cyber resilience, analyze cyber security defense and recovery investment strategies and balance security investment allocation strategies.Design/methodology/approachBased on the expected utility theory, this paper presents an expected resilience framework, including an expected investment resilience model and an expected profit resilience model that directly addresses the optimal joint investment decisions between defense and recovery. The effects of linear and nonlinear recovery functions, risk interdependence and cyber insurance on defense and recovery investment are also analyzed.FindingsAccording to the findings, increasing the defense investment coefficient reduces defense and recovery investment while increasing the expected resilience. The nonlinear recovery function requires a smaller defense investment and overall security investment than the linear one, reflecting the former’s advantages in lowering cybersecurity costs. Moreover, risk interdependence has positive externalities for boosting defense and recovery investment, meaning that the expected profit resilience model can reduce free-riding behavior in security investments. Insurance creates moral hazard for firms by lowering defensive investment, yet after purchasing insurance, expanded coverage and cost-effectiveness incentivize firms to increase defense and recovery spending, respectively.Originality/valueThe paper is innovative in its methodology as it offers an expected cyber resilience framework for integrating defense and recovery investment and their effects on security investment allocation, which is crucial for building cybersecurity resilience but receives little attention in cybersecurity economics. It also provides theoretical advances for cyber resilience assessment and optimum investment allocation in other fields, such as cyber-physical systems, power and water infrastructure – moving from a resilience triangle metric to an expected utility theory-based method.

The Economic Impact of Arms Spending in Germany, Italy, and Spain

Abstract In the last 10 years, military expenditures of NATO EU countries (according to NATO definitions and data) have increased by almost 50 %, from €145 billion in 2014 to €215 billion in 2023. In this context, it is important to assess the economic consequences that the current increase in military spending is likely to have on Europe’s economies. We focus on Germany, Italy and Spain, and we concentrate on arms acquisitions. The article investigates the economic effect of military expenditure on growth and employment and compares it to the impact that could emerge from a similar expenditure for education, health and the environment. We use an input–output methodology – already adopted by several studies – to assess the relevance of imports and of demand towards different sectors providing intermediate inputs. We assess the likely impact on output and jobs of one billion euros of extra spending in arms, and compare it to the outcomes of the same amount spent in education, health and the environment. Our findings show that for all countries non-military public expenditures have a greater impact on the economy and employment than spending for arms acquisition.

Budgeting for defense in the United Kingdom

The recent growth in international tension has been associated with countries either increasing their military spending or discussing such increases—consequently, defense budgeting has attracted increased attention. This article reviews the U.K. defense budget in an historical context. It sets out the position in mid-2024 when the newly elected Labour Government commissioned a Strategic Defence Review. It summarizes the planning process and the government’s budget constraints; considers the issues involved in measuring the defense budget and making international comparisons; reviews trends in the defense budget; and the choices that need to be made between spending on personnel, conventional equipment, and nuclear weapons.

Economic and social impacts of armed conflicts: Assessing the effects of military operations on development

The paper highlights the impact of military conflicts on society's socio-economic development. A review of scientific publications on the subject is carried out. The impact of the Russia-Ukraine military conflict on the socio-economic development of Ukraine is considered based on regression analysis. The main consequences of military operations in Ukraine are outlined. The approaches of the leading international organisations to accounting and auditing the consequences of conflicts and wars are determined. Examples are given, and the main aspects of accounting for losses caused by military conflict in different countries are compared. The study aims to comprehensively analyse and assess the impact of military conflicts on economic development and social aspects of society. Regression analysis methods were used to determine the relationship between military conflicts and economic indicators such as GDP, inflation, unemployment, public debt, defence spending, scientific data analysis, synthesis and comparison, and geospatial and comparative analysis, which helped to assess the direct and indirect effects of conflicts on economic development and the social sphere in Ukraine. The article analyses the social consequences of the military conflict in Ukraine in 2014–2024. An empirical analysis of economic losses from military conflicts is carried out. The need for an integrated approach to assessing and overcoming the consequences of wars and conflicts and coordination between government organisations, local communities and international partners to achieve sustainable development and restore the country's socio-economic situation is established.

Defense Expenditure and National Well-Being: Evidence from the G7 Countries

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.

Is Geopolitical Risk a Reason or Excuse for Bigger Military Expenditures?

Is Geopolitical Risk a Reason or Excuse for Bigger Military Expenditures?

Military Practices and Experiences and their Effects on the Environment

International humanitarian law provides the guidelines to meet environmental standards during military operations. Thus, we explore the effect of military spending on CO2 emissions in Saudi Arabia by using data from 1971-2022 and the cointegration technique. Moreover, the effect of fossil fuels on CO2 emissions is also tested along with testing the Environmental Kuznets Curve (EKC) in the model. The EKC is corroborated by the effect of economic progress on CO2 emissions in the long and short runs. Moreover, military spending raises CO2 emissions. A 1% increasing military spending raises 0.0414% of CO2 emissions. Thus, military operations and activities are responsible for environmental problems. The effect of fossil fuels is also positive and a 1% increasing fossil fuels raises 1.0984% of CO2 emissions. The short-run results substantiate the long-run conclusions with different elasticity parameters. The study suggests reducing military spending and operations to protect the environment. Moreover, fossil fuel consumption should also be reduced by shifting energy needs toward clean sources.

Analysis of the Relationship Between Military Expenditure and Investment in the Economic Community of West African States: A Heterogeneous Panel Data Approach

Abstract West Africa has been grappling with various security challenges prompting governments’ intervention via military expenditure both at the country and regional level. Given the sporadic surge in military expenditure in the region and the potential effect such expenditure may exert on investment which is a sin qua non to the development process of any economy or region, this study utilizes the augmented mean group (AMG) approach and the Granger non-causality test in investigating the impact and causal relationship between investment and military expenditure in the Economic Community of West African States (ECOWAS) between 1980 and 2020. With country-specific cross-dependence and heterogeneity adequately accounted for, the study found that military expenditure has a dampening impact on investment at both the panel and country levels; unemployment adversely impacts investment; whereas economic growth stimulates investment (catalytic effect) in the ECOWAS, although at differing levels of significance. The study also established a long-run relationship among the variables; with only economic growth Granger causing investment. The study thus recommends that country-specific and regional-based military policies be established to glean economic growth through viable investment.

Drivers and Impact of European Defence Market Integration: A Literature Meta-Synthesis with Economic Focus

ABSTRACT The Ukraine war, the aftermath of COVID-19, Brexit and shifting US geostrategic interests are putting pressure on the European defence situation, strategy and budgets. The current crises expose warfare capability gaps in the European armed forces and capacity constraints of the European defence industry after decades of the peace dividend. More nations are calling for stronger engagement of the EU in the defence sector to overcome these challenges and complete the European defence sector integration that started in the late 1990s. It is estimated that more cooperation in defence procurement and research could save up to 30% of the current €290 bn total EU27 defence budgets. Can this combination of recent factors provide new impulses towards a unified European defence market, more cooperation on defence procurement and industry consolidation? We conducted a literature review (‘meta-synthesis’) of 172 journal articles, studies and think-tank papers since 1995 to build a holistic picture. The analysis aims to describe the progress and challenges of European defence market integration from an economic viewpoint. It provides future researchers with a basic understanding of defence industrial challenges, motivations and economic drivers of European defence integration as well as of reasons for resistance and potential scenarios.

Defence Spending and Income Inequality. An Asymmetric Empirical Evidence from a Decomposition Analysis of Defence Spending in the Case of Greece

ABSTRACT This study is the first to empirically examine the asymmetric and compositional effects of defence spending on three different measures of income disparity. Using the Nonlinear Autoregressive Distributed Lag (NARDL) approach, the study analyses the short- and long-term impacts of disaggregated defence spending on income inequality in Greece. The findings have significant theoretical and policy implications. First, in the medium term, increased military spending in Greece widens income disparity by boosting the income share of the wealthiest. Second, in the long term, positive changes in military expenditures reduce income inequality, primarily benefiting lower-income groups. Third, long-term negative changes in defence spending harm middle- and low-income groups. Finally, the compositional analysis highlights that increases in military spending, mostly on personnel and, to a lesser extent, on equipment, improve long-term income equality, while decreases in spending on personnel significantly worsen income disparity. Given these findings and the evolving nature of warfare, Greece should gradually adopt a new defence strategy. This strategy should emphasise extensive personnel reserves, prioritise domestic military equipment over costly foreign alternatives, and rationalise defence expenditures by reallocating budget expenditures towards health, education, and social welfare programs. These measures would enhance living standards and reduce income inequality in Greece.

Sicherheit als wirtschaftspolitische Herausforderung

Abstract This paper examines the evolving role of security as a key economic and political challenge, focusing on Germany’s response to geopolitical instability, particularly after the Russian invasion of Ukraine. It argues that security is now a central economic factor, influencing investment and market stability. Based on data on defense spending and fiscal policy, the article highlights inadequate earlier efforts to rebuild defense capacity, with rising fiscal pressures. The paper emphasises the need for reforms in Germany’s and Europe’s security strategies to address hybrid threats and financial burdens.

The Analysis of Whether India Views China as a Military Security Threat from a Quantitative Perspective

China is a neighboring major country of India. Many scholars have consistently emphasized in their papers that India regards China as its biggest military threat. If this viewpoint is fair, then India’s military defense will inevitably be influenced by China. In other words, the military defense of China and India should be highly correlated. National defense and military can be measured by two indicators: weapon throughput and the proportion of military expenditure to domestic GDP. According to the dimensionless operation and entropy weight method in quantitative analysis, the weights of two indicators can be obtained and their correlation can be analyzed. After quantitative analysis, there is a weak correlation between the military defense of China and India. So, it can be concluded that India does not fully consider China as the main military threat.

Government Expenditure and Economic Growth of Nepal

Purpose: This study aims to analyze the relationship between various categories of government expenditure and economic growth in Nepal. The purpose is to understand how these defense, health, agriculture and education expenditures influence economic performance and offer insights for more effective resource allocation.Methods: This research used a combination of descriptive and causal research designs, using secondary data sourced from published reports. Data from 1976 to 2022 AD were selected for its comprehensive data availability and analyzed.Results: The findings reveal that defense expenditure has a negative and significant association with economic growth, suggesting that high levels of defense spending are detrimental to economic development. Conversely, health and education expenditures show positive and significant relationships with economic growth, highlighting the importance of investing in human capital for fostering sustainable development. Agriculture expenditure, although positively related to economic growth, is statistically insignificant, indicating the need for policy refinements to enhance its impact. Conclusion: The study underscores the necessity for strategic reallocation of government resources. Reducing defense expenditures and increasing investments in health, education and agriculture are essential for promoting robust and sustainable economic growth.

The economic impact of terrorism in South Asia

This study examines the economic impact of terrorism in South Asia. The region is currently home to 123 active terrorist/insurgent groups and is accountable for over 27 % of recorded global terrorist attacks. The annual data from the six most-terror-affected South Asian countries (Afghanistan, Bangladesh, India, Nepal, Pakistan, and Sri Lanka) during the US-led war on terror (2001 - 2022) is used. For econometric estimation, the five models: fixed-effect, generalized least squares (GLS), generalized estimating equation (GEE), quantile regression (QR), and panel-corrected standard errors (PCSE) are applied. Terror-related death (a proxy for human capital loss) and per capita income (a proxy for purchasing power) are considered to measure terrorism and its economic impact. In addition, four economic indicators (military expenditure, population, official development assistance (ODA), and USAID) and three institutional indicators (electoral democracy index, political violence index, and mobilization for autocracy index) are taken into account as control variables. The result suggests that every additional 886 terror-related human capital loss across the region significantly reduces the purchasing power of each South Asian person by at least 9.800 US dollars. Moreover, among the control variables, military expenditure, political violence, and mobilization for autocracy negatively affect per capita income, while electoral democracy, population, ODA, and USAID positively impact it. This study will also help understand the implications of the United Nations' Sustainable Development Goals (SDGs) agenda and achieving specific targets such as SDG 8 (promoting economic growth) and SDG 16 (promoting just, peaceful, and inclusive societies) based on the most terror-affected region.

Экономика РФ в январе – апреле 2024 года

Based on the analysis of a number of macroeconomic and sectoral indicators, it is established that in January–April 2024, there was an economic decline compared to the corresponding period in 2023. Moreover, the extent of the decline is increasing month by month. It is noteworthy that the authorities, as in the past in the USSR, are turning a blind eye to the decline. The causes of the decline are determined by the combined impact of both cyclical factors (Western economic sanctions, overstrain from military expenditures) and long-term trends of a decline in fixed assets and a reduction in the workforce, as well as the qualifications of personnel at all levels. The future prospects of the Russian economy are determined, along with ensuring effective economic policy and building a functional state system, by the level of escalation of the conflict in Ukraine and the extent of economic sanctions. In the event of significant escalation of military actions, what will be required is a transition to a wartime economy with a high share of military expenditures in GDP, a reduction in consumer spending and non-productive investments, mobilization of labor resources in favor of the armed forces and the military-industrial complex, and the introduction of a rationing system for main food products, as well as the nationalization of several companies. The success of this structural maneuver is determined by the organization and qualifications of the state apparatus. In the case of moderate escalation of military actions and economic sanctions, the radical nature of structural and institutional changes will decrease.

Military rations: Nutritional, sensorial and technological quality and their effects on military physical exercise in extreme environments.

In recent years, many countries have significantly increased military spending, mainly due to geopolitical instability in several regions and the potential risk of armed conflicts spreading worldwide. In this context, understanding the nutritional needs of soldiers in different climates (warm, cold and high altitude) is important and directly impacts the performance and health of soldiers, especially in extreme environments. The amount of liquids, calories, and macro- and micronutrients contained in military rations must be determined considering the type of exercise, duration and environment. Military rations, in addition to being nutritionally adequate, must be practical, sustainable and easy to consume at any temperature and situation. Given these considerations, this study aimed to review scientific knowledge regarding the convenience, sensory attributes and nutritional components of military rations. Furthermore, this review studied the factors influencing soldiers' appetite, gut microbiota and nutritional needs during training or combat in extreme environments (warm, cold and high altitude). This exploration further advances our understanding of contemporary nutritional strategies for military personnel, contributing to future research and highlighting areas that must be developed.

FDI, defense spending, and economic prosperity

AbstractThe relationship between foreign direct investment (FDI) and military spending in the Middle East and North Africa (MENA) region is complex and multifaceted. High levels of military spending can deter foreign investors, as it creates an uncertain and potentially volatile investment climate. However, countries that invest in their military infrastructure and capabilities may be seen as more stable and secure, which can attract foreign investors. Taking into account several factors that can influence this relationship, including political stability, security concerns, and economic factors, this work analyzes whether military spending attracts foreign capital into the region. Using a dynamic panel data methodology along with other relevant macroeconomic variables, results show that the military expenditure has a positive and significant impact on FDI inflows into the MENA region. The paper highlights the fact that policymakers in the region must carefully balance military spending with investments in other areas of the economy in order to create a stable and favorable investment climate that attracts foreign investors and contributes to long‐term economic growth and development achieving both security and welfare.

A spatiotemporal analysis of NATO member states' defense spending: how much do allies actually free ride?

Abstract Concerns over free riding in NATO are widespread. An intuitive approach to analyzing free riding is treating it as a systematic pattern of spatial interdependence between the allies: how does a NATO member's defense spending react to changes in other allies' military expenditures? While recent work has found statistically significant free riding (negative spatial interdependence in the outcomes), it suffers from important limitations. First, this research does not adequately account for temporal dependence. Second, it does not quantify the effect of interest. Accounting directly for temporal dependence provides a meaningfully distinct perspective on the within-alliance dynamics, demonstrating that the spatiotemporal effect of free riding is, in fact, more substantial than its short-run effect, challenging inferences of static spatial models. We discuss the relevant practical and theoretical implications.