Does military expenditure crowd out health-care spending? Cross-country empirics

Abstract

The trade-off between military expenditure and public health spending has remained an unsettled empirical issue. This paper investigates whether military expenditure has crowded out public health spending in 116 countries (including a subsample of 87 non-OECD countries) over the period 2000–2017. Through our system generalized methods of moments (GMM) estimations, we find that military expenditure, whether it is measured on a per-capita basis or as a proportion of total government expenditure, has a positive impact on the demand for health care. Nonetheless, we find a significant crowding-out effect of military expenditure on domestic government health spending by taking into account government fiscal capacity. The evidence we present supports the long-standing view that military expenditure has a particular ability to compete government financial resources away from publicly funded health spending. By interacting the military expenditure variable with income per capita, we find that an increase in income per capita has neutralized the crowding-out effect of military expenditure on domestic government health spending – less well-off countries stand to suffer most, and wealthy ones stand to suffer least, from the crowding-out effect. The crowding-out effect is statistically more specific to middle- and low-income countries in our samples.

Exploring the Role of Institutional Quality in the Crowding-out Effect of Military Expenditure on Health Expenditure and Outcomes in Africa

“…Contrarily, empirical investigations also established that the decision to target military activeness as opposed to improved human capital development has birthed evidence of a crowding-out effect between military and health expenditure Ali, 2011;Zhang et al, 2017;Fan et al, 2018;Grigorakis and Galyfianakis, 2022;Ikegami & Wang, 2022).…”

“…A recent study by Grigorakis and Galyfianakis (2022) also supported evidence of the crowding-out hypothesis between military expenditure and public health expenditure, as positive changes in the former led to an increase in out-of-pocket health expenditure. Also, Ikegami and Wang (2022) revealed that using the system GMM for a group of 116 countries, there is evidence that military expenditure crowds out public health spending.…”

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“…Climate disasters are not under human control but are not completely beyond human reach. Much less of the money spent on war could have been spent on innovation, food, and the health system (Ikegami & Wang, 2022). The world's medical system is still lacking (Kaiman et al, 2014;Rahman et al, 2020), facing newer types of diseases and challenges and will face more in coming days (Cazzolla Gatti, 2021;Koumoundouros, 2022;Geddes, 2022).…”

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“…Climate disasters are not under human control but are not completely beyond human reach. Much less of the money spent on war could have been spent on innovation, food, and the health system (Ikegami & Wang, 2022). The world's medical system is still lacking (Kaiman et al, 2014;Rahman et al, 2020), facing newer types of diseases and challenges and will face more in coming days (Cazzolla Gatti, 2021;Geddes, 2022;Koumoundouros, 2022).…”