THE RELATIONSHIP BETWEEN DEFENSE EXPENDITURES AND ECONOMIC GROWTH: A STUDY ON OECD COUNTRIES

Year 2021, Volume: 30 Issue: 2, 139 - 153, 31.10.2021

Özkan Zülfüoğlu

https://doi.org/10.35379/cusosbil.905022

Cited By: 1

Abstract

Defense spending is born out of necessity. The amount and composition of defense expenditures differ according to the geographical locations and political perspectives of the countries. However, the effect of defense expenditures on growth has been a subject that has been extensively researched. In this study, first of all, the effects of defense expenditures on the defense industry and possible growth channels are discussed. With the aim of establishing a national independent defense industry, states can give incentives to these areas. Behind these incentives lies the reduction of military economic dependence, as well as supporting the private sector and stimulating economic growth.. In the study, using the data of 35 OECD countries between 2005 and 2019, the effect of defense expenditures on economic growth through the causality relationship with GDP was examined with the help of panel data causality analysis. The results of the analysis showed that defense expenditures will adversely affect economic growth in the long run. However, it should be noted that the results reflect a general situation. It is thought that the differences in the development levels of the countries, arms imports and the connections of the defense industry with other sectors may be effective on growth.

Keywords

Defense Expenditures, Economic Growth, Panel Data Causality Analysis

SAVUNMA HARCAMALARI EKONOMİK BÜYÜME İLİŞKİSİ: OECD ÜLKELERİ ÜZERİNE BİR İNCELEME

Abstract

Savunma harcamaları zorunluluktan doğmakta, ülkelerin coğrafi konumları ile politik bakış açılarına göre miktar ve bileşimi farklılık göstermektedir. Bu özelliklerinin yanında, savunma harcamalarının ekonomik büyüme üzerindeki etkisi, iktisat ve maliye literatüründe fazlasıyla araştırılan bir konu olmuştur. Bu çalışmada, öncelikle savunma harcamalarının savunma sanayii üzerinden doğurabileceği ekonomik sonuçlar ve ekonomik büyüme üzerindeki etki kanalları tartışılmıştır. Bilindiği üzere siyasi iktidarlar, ulusal bağımsız bir savunma sanayii kurulması hedefiyle savunma sanayii teşviklerine başvurabilmektedirler. Bu teşviklerin arkasında savunma sanayiinde dışa bağımlılığı azaltmanın yanında, özel sektörü desteklemek ile ekonomik büyümenin uyarılması da yatmaktadır. Çalışmada 35 OECD ülkesinin 2005-2019 yılları arasındaki verisi kullanılarak, savunma harcamalarının GSYH ile olan nedensellik ilişkisi üzerinden, ekonomik büyümeye olan etkisi panel veri nedensellik analizi yardımıyla incelenmiştir. Analiz sonuçları, uzun dönemde savunma harcamalarının ekonomik büyümeyi olumsuz etkileyebileceğini göstermiştir. Bununla birlikte sonuçların genel bir durumu yansıttığı, ülkelerin gelişmişlik düzeyleri, silah ithalat ve ihracat durumları ile savunma sanayiinin diğer sektörlerle bağlantılarının büyüme üzerinde etkili olabileceği düşünülmektedir. 

Keywords

Savunma Harcamaları, Ekonomik Büyüme, Panel Veri Nedensellik Analizi

References

• Abu-Bader S. & Abu-Qarn, A. (2003). Government expenditures, military spending and economic rrowth: causality evidence from Egypt, Israel and Syria. MPRA Paper No. 1115. https://mpra.ub.uni-muenchen.de/1115/1/MPRA_paper_1115.pdf
• Afonso, A. & Aubyn, M. St. (2008). Macroeconomic rates of return of public and private investment crowding-in and crowding-out effects. Working Paper Series, NO 864. https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp864.pdf
• Ağır, H., Kar, M., & Nazlıoglu, Ş. (2011). Do remittances matter for financial development in the MENA region? Panel cointegration and causality analysis. Empirical Economics Letters, 10(5), 449-456. https://doi.org/10.1016/j.econmod.2010.05.015
• Alexander W. (1990). The impact of defense spending on economic growth. Defence Economics, 2(1), 39-55. https://doi.org/10.1080/10430719008404677 Anwar, MA, Rafique, Z., & Joiya, SA (2012). Defense spending economic growth nexus: A case study of Pakistan. Pakistan Economic and Social Review, 163-182. https://www.jstor.org/stable/43855779
• Bahal, G., Raissi, M., & Tulin, V. (2018). Crowding-Out or Crowding-In? Public and private investment in India. World Development, 109, 323-333. https://doi.org/10.1016/j.worlddev.2018.05.004
• Benoit, E. (1973). Defense and Economic Growth in Developing Countries. Lexington Books.
• Benoit, E. (1978). Growth and defense in developing countries. Economic Development and Cultural Change, 26(2), 271-80. http://dx.doi.org/10.1086/451015
• Bozkurt, İ. & Karakuş, R. (2017). Finansal içerme-Ekonomik gelişmişlik ilişkisi: Dünya geneli için ampirik bir inceleme. Üçüncü Sektör Sosyal Ekonomi Dergisi, 55(3), 1504-1523. https://doi.org/10.15659/3.sektor-sosyal-ekonomi.20.06.1357
• Cappelen Å., Gleditsch NP, & Bjerkholt O. (1984). Military spending and economic growth in the OECD countries. Journal of Peace Research, 21(4), 361-373. https://doi.org/10.1177/002234338402100404
• Chang, T., Fang, W., Wen, LF, & Liu, C. (2001). Defence spending, economic growth and temporal causality: evidence from Taiwan and Mainland China, 1952-1995. Applied Economics, 33(10), 1289-1299.
• d’Agostino G., Dunne JP, & Pieroni L (2018). Military expenditure, endogeneity and economic growth. Defence and Peace Economics, 30(5), 509-524. https://doi.org/10.1080/10242694.2017.1422314
• De Grasse Jr., RW (1993). Military Expansion Economic Decline: the Impact of MilitarySpending on U.S. Economic Performance, M.E. Sharpe, Armonk.
• Deger, S. Sen, S. (1983). Military expenditure, spin-off and economic development. Journal of Development Economics, 13, 67-83. https://doi.org/10.1016/0304-3878(83)90050-0
• Desli, E. & Gkoulgkoutsika, A. (2021). Military spending and economic growth: A panel data investigation. Economic Change and Restructuring, 54, 781-806. https://doi.org/10.1007/s10644-020-09267-8
• Desli, E., Gkoulgkoutsika, A., & Katrakilidis, C. (2017). Investigating the dynamic interaction between military spending and economic growth. Review of Development Economics, 21(3), 511-526. https://doi.org/10.1111/rode.1226
• Devore, MR (2014). Defying convergence: Globalisation and varieties of defence-industrial capitalism. New Political Economy, 20(4), 569–593. https://doi.org/10.1080/13563467.2014.951612
• European Commission (2009). Defence Industry, Comprehensive sectoral analysis of emerging competences and economic activities in the European Union. https://ec.europa.eu/social/BlobServlet?docId=4187&langId=en
• Erden, L. & Holcombe, RG (2006). The linkage between public and private investment: A co-integration analysis of a panel of developing countries. Eastern Economic Journal, 32(3), 479-492. https://www.jstor.org/stable/40326291
• Faini R., Annez P. & Taylor L. (1984). Defense spending, economic structure, and growth: evidence among countries and over time. Economic Development and Culturel Change, 32(3), 487-498. https://www.jstor.org/stable/1153333
• Frederiksen, PC & Looney, RE (1983). Defense expenditures and economic growth in developing countries. Armed Forces & Society, 9(4), 633-645. https://doi.org/10.1177/0095327X8300900406
• Friedman, BM (1978). Crowding Out or Crowding In? Economic consequences of financing government deficits. Brookings Papers on Economic Activity, 9(3), 593-641. https://www.brookings.edu/wp-content/uploads/2016/11/1978c_bpea_friedman.pdf
• Gökmenoğlu, KK, Taşpınar, N., & Sadeghieh, M. (2015). Military expenditure and economic growth: The case of Turkey. Procedia Economics and Finance, 25, 455-462. https://doi.org/10.1016/S2212-5671(15)00757-1
• Hadri, K. (2000). Testing for stationarity in heterogeneous panel data. The Econometrics Journal, 3(2), 148-161. https://doi.org/10.1111/1368-423X.00043
• Hadri, K. & Kurozumi, E. (2012). A simple panel stationarity test in the presence of serial correlation and a common factor. Economics Letter, 115, 31-34. https://doi.org/10.1016/j.econlet.2011.11.036
• Halıcıoğlu, F. (2007). Defense spending and economic growth in Turkey: An empirical application of new macroeconomic theory. Review of Middle East Economics and Finance, 2(3), 193-201. https://doi.org/10.2202/1475-3693.1028
• Hatemi-J, A., Chang, T., Chen, WY, Lin, FL, & Gupta, R. (2018). Asymmetric causality between military expenditures and economic growth in top six defense spenders. Quality & Quantity, 52(3), 1193-1207. https://doi.org/10.1007/s11135-017-0512-9
• Heo, U. (2010). The relationship between defense spending and economic growth in the United States. Political Research Quarterly, 63(4), 760–770. http://www.jstor.org/stable/25749247
• Karagöl, E. & Palaz, S. (2004). Does defence expenditure deter economic growth in Turkey? A cointegration analysis. Defence and Peace Economics, 15(3), 289–298. https://doi.org/10.1080/10242690320001608908
• Karakaya, C. & Şahinoğlu, T. (2020). Savunma harcamaları ve ekonomik büyüme ilişkisi: Türkiye örneği. Business and Economics Research Journal, 11(2), 335-351. https://doi.org/10.20409/berj.2020.253
• Korkmaz, S. (2015). The effect of military spending on economic growth and unemployment in mediterranean countries. International Journal of Economics and Financial Issues, 5(1), 273-280.
• Landau, D. (2007). The impact of military expenditures on economic growth in the less developed countries. Defence and Peace Economics, 5(3), 205-220. https://doi.org/10.1080/10430719408404793
• Lee, C-C. Chen, S-T. (2007). Do defense expenditures spur GDP? A panel analysis from OECD and non-OECD countries. Defence and Peace Economics, 18(3), 265-280. https://doi.org/10.1080/10242690500452706
• Leontief W & Duchin, F. (1983). Military Spending: Facts and Figures, Worldwide Implications and Future Outlook. Oxford University Press.
• Lim, D. (1983). Another look at growth and defense in less developed countries. Economic Development and Cultural Change, 31(2), 377-84. http://www.jstor.org/stable/1153485
• Melman, S. (1974). The Permanent War Economy: American Capitalism in Decline. Simon and Schuster.
• Moretti E., Steinwender C. & Reenen JV (2016), The intellectual spoils of war? Defence R&D, productivity and spillovers. https://eml.berkeley.edu/~moretti/military.pdf
• OECD (2020). Gross Domestic Product (GDP) Database. https://data.oecd.org/gdp/gross-domestic-product-gdp.htm
• Ortiz C., Alvarado R., & Salinas A. (2019). The effect of military spending on output: New evidence at the global and country group levels using panel data cointegration techniques. Economic Analysis Policy, 62, 402-414. https://doi.org/10.1016/j.eap.2018.10.004
• Pavitt, K. (1984). Sectoral patterns of technical change: Towards a taxonomy and a theory. Research Policy, 13(6), 343-373. https://doi.org/10.1016/0048-7333(84)90018-0
• Peseran, MH (2004). General diagnostic tests for cross section dependence in panels. IZA Discussion Paper, 1240. https://ftp.iza.org/dp1240.pdf
• Pesaran, MH (2007). A simple panel unit root test in the presence of cross‐section dependence. Journal of Applied Econometrics, 22(2), 265-312. https://doi.org/10.1002/jae.951
• Rasmussen, PN (1956). Studies in Intersectoral Relations. North-Holland.
• Rothschild, KW (1973). Military expenditure, exports and growth. Kyklos, 26(4), 804-13. https://doi.org/10.1111/j.1467-6435.1973.tb02777.x
• Saba, CS & Ngepah, N. (2019). Military expenditure and economic growth: Evidence from a heterogeneous panel of african countries. Economic Research-Ekonomska Istraživanja, 32(1), 3586-3606. https://doi.org/10.1080/1331677X.2019.1674179
• SIPRI (2020). Military Expenditure Database. https://www.sipri.org/databases/milex
• Tatoğlu, FY (2018). Panel Zaman Serileri Analizi. Beta Yayınları.
• T.C Cumhurbaşkanlığı Savunma Sanayii Başkanlığı (2021), Savunma Sanayiimiz Tarihçe. https://www.ssb.gov.tr/WebSite/contentlist.aspx?PageID=47&LangID=1
• Temursho, U. (2016), Backward and Forward Linkages and Key Sectors in the Kazakhistan Economy. https://www.adb.org/sites/default/files/project-documents/47110/47110-001-dpta-en_2.pdf
• Wang, T-P., Shyu, S. H-P., Chou, H-C. (2012). The impact of defense expenditure on economic productivity in OECD countries. Economic Modelling, 29(6), 2104-2114. https://doi.org/10.1016/j.econmod.2012.06.041
• Westerlund, J. (2007). Testing for error correction in panel data. Oxford Bulletin of Economics and Statistics, 69(6), 709-748. https://doi.org/10.1111/j.1468-0084.2007.00477.x
• Yıldırım, J., Sezgin S., & Ocal, N. (2005). Military expenditure and economic growth in middle eastern countries: A dynamic panel data analysis. Defence and Peace Economics, 16(4), 283–295. https://doi.org/10.1080/10242690500114751