The Relationship Between Military Expenditure and Economic Growth in Some Middle Eastern Countries: What Is the Story?

Abstract

How the military burden affects economic growth, especially in developing countries, is the subject of much research in the economic literature. Studies have varied on the findings of the effects of military expenditure (ME) on growth. Therefore, we see multiple schools of thought about the relationship between ME and economic growth. However, there is a consensus that ME does in general come at an economic cost.In this paper, we use annual time series data on ME, economic growth, net export (NX), and central government expenditure (GE) in Israel and its four Arab neighbors for the period 1988-2010 to investigate the relationship between ME and the other variables for each country individually. The paper uses the unit root and cointegration techniques to determine the relationship between ME and GDP. To investigate the direction of causality between ME and GDP, we use Granger-Causality method.The main conclusion is that "relative" peace time doesn't mean countries will stop or reduce ME. The rate of ME growth might not be as fast as it is during war times, but it is affected positively by the local income and the economic situation of the country.

Military Expenditure Economic Growth Nexus in Jordan: An Application of ARDL Bound Test Analysis in the Presence of Breaks

“…Based on the empirical findings obtained, we conclude that military expenditure promotes economic growth in the country under study. Our findings are of particular importance considering the changes to the regional and global security environment with security concerns as an integral component (Al-Hamdi and Alawin 2017).…”

“…Its military personnel are more numerous than 6 See Yildirim et al (2005) for a discussion on the changes in military balances in Middle Eastern countries. 7 See and Al-Hamdi and Alawin (2017) for reasons behind peaceful changes and developments between Jordan and its neighbours. Also, see Chen et al (1996) for a detailed discussion regarding the collective action problem and increases in milex for countries neighbouring Israel and motives for Jordan's involvement in the Israeli's wars.…”

The Causality Relationships Between the Kingdom of Saudi Arabia’s (KSA) Military Expenditure and Economic Growth in the Period From 1987 to 2019

“…For instance, having invested more of its resources in military expenditure, KSA has fewer resources for economic development. In 2007, worldwide expenditure on defence was $1339 billion; this represented 2.5% of the world's GDP (Al-Hamdi & Alawin, 2016). Between 1998 and 2007, defence expenses increased by 45% due to increased attacks in the Middle East and in other parts of the world (Khalid et al, 2020).…”