Military expenditure and economic growth in the European Union: Evidence from SIPRI’s extended dataset

Abstract

The aim of this article is to shed light on the fiscal consequences of economic growth in the EU15 countries by disentangling military and civilian government expenditure. T he economic crisis that began in the late 2000s has spurred economists to (re)evaluate the macroeconomic consequences of public sector spending. No consensus has emerged which makes it difficult to address policy options. For European countries, especially, estimating the influence of public expenditure is a major issue as many of them have reached public debt limits stipulated by Maastricht criterion. The subsequent fiscal consolidation then raised questions regarding the consequence of debt limits on current economic performance. The aim of this article is to provide empirical evidence of the long-run effect of public expenditure in the EU15 countries by comparing military and nonmilitary, civlian public expenditure. 1Military expenditure lies at the intersection of security needs and budgetary constraints: A rise in perceived threats should lead to a rise in military expenditure whereas bad economic conditions could have an adverse effect on military outlays. Recent trends in the EU15 show that following the fiscal consolidation policy, military expenditure fell by an average of 12.5 percent between 2010 and 2014, especially so in countries most severely affected by the economic crisis, i.e., Greece, Italy, Portugal, and Spain. (Among the EU15, only Sweden showed a rise in military expenditure for the 2010-2014 period.) At the same time, the EU15 are facing increased threats: For instance, the attitude of Russia appears somewhat aggressive and generates uncertainties regarding Crimea, terrorists' attacks have taken place in Paris and elsewhere in Europe, and a number of European countries are involved in the international coalition against ISIS. The nature of many of these kinds of threats is more diffuse than before so that security issues raise challenges not yet fully taken into account by European defense strategy.

The demand for military spending in Latin American countries

“…A further contribution of this paper is the fact that, in the empirical investigation that follows, we use SIPRI's new consistent database on military spending (Perlo-Freeman 2017; Perlo-Freeman and Sköns 2016). In some cases, the time-series of the dataset extend back to 1949 and hence offer the opportunity for researchers to obtain more robust and reliable inferences over a longer time horizon as recent studies have done addressing various aspects of military spending (inter alia: Dunne and Tian 2016;Malizard 2016;d' Agostino et al 2017).…”

Panel Cointegration Analysis of Military Expenditure and Economic Growth in the Selected Balkan Countries

“…Barros (2002) emphasize that the Balkans is the most religiously and ethnically non-homogenous region in which ethnic conflicts and wars have often dominated the region's agenda. Malizard (2016) argues that military expenditure are related to security needs and budgetary limits. It implies that an increase in perceived threats should lead to a rise in military expenditure whereas unfavorable economic situations could have negative impact on military outlays.…”

Defence expenditure and economic growth in Latin American countries: evidence from linear and nonlinear causality tests

“…On the other hand, such spending can prove to be growth retarding through the crowding-out of other more productive forms of public spending as well as investment. Both cross-country and specific country case studies have empirically probed into this question with mixed findings, as noted above, although the scales do seem to tilt in favor of a negative net impact on growth (inter alia: Compton and Paterson 2016;Malizard 2015Malizard , 2016Tian 2015, 2016;Kollias and Paleologou 2016).…”