The impact of military spending and income inequality on economic growth in Turkey

An extensive literature on the effect of military expenditures on economic growth yields conflicting results. However, a crucial issue that has not been investigated in this context is the possible effect of inequality. The impact of military expenditures on economic growth in Turkey has also received substantial attention. Yet, the majority of these studies are not constructed based on a structural model, but rather examine the causality between the variables in question. Considering these two shortcomings in the literature and the lack of consistent results, this study attempts to provide further evidence for the relationship between military expenditures and economic growth for the case of Turkey by considering income inequality within an augmented Solow growth model. Our findings for the 1963–2008 period show that while income inequality has a positive impact on economic growth, military expenditures have no significant effect.     

Asymmetric effects of military expenditure between Turkey and Greece

One of the major topics of the defense economics literature regarding Turkey and Greece has been the empirical modeling of various aspects of arms racing. However, despite a considerable amount of research, little evidence has been found in favor of an arms race between the two countries. In the literature, this failure of applied studies has been attributed, among other reasons, to the sensitivity of the results to the underlying model specification, to small sample size, and to measurement issues. This study uses novel, nonlinear, models to investigate the possible relationship between the military expenditures of the two countries. It is assumed that if there are two regimes characterizing the low (or negative) and high-growth military expenditure periods, the growth rates of one country's military expenditure may have distinct effects on the military expenditure regimes of the other country or may contribute to the change from one regime to another. The nonlinear models examined are Smooth Transition Regression models (STRs). Strong evidence of nonlinearity for Greece is found, with asymmetry relating to two distinct regimes through lagged Turkish military expenditure changes.     

The demand for military expenditure in authoritarian regimes

This paper examines whether there are systematic differences in military spending between different types of autocratic regimes. We view military expenditure as an instrument a dictator can exploit in order to stay in power. How he utilises this instrument depends on the institutional set-up of his regime. We distinguish between military regimes, single party states and personalist regimes, and predict that military regimes should have the highest, whereas personalist dictatorships should have the lowest level of military spending. Using panel data on 64 dictatorships from 1960 to 2000, we find empirical evidence that our hypotheses are not rejected.     

Does military spending promote social welfare? A comparative analysis of the BRICS and G7 countries

Whether military spending is capable of promoting social welfare is currently a controversial issue. The aim of this paper is to investigate how military spending affects the input and output of social welfare (i.e. social welfare expenditures and social welfare index). A panel cointegration analysis and an impulse response function are conducted with multi-country panel data, over two time periods, 1998–2011 and 1993–2007. In addition, to extend a comparative analysis over different economies, BRICS (i.e. Brazil, Russia, India, China, South Africa) and G7 (i.e. the US, Japan, Germany, the UK, France, Italy, Canada) countries are selected as representatives of emerging economies and developed countries, respectively. The empirical results show that military spending enhances social welfare expenditures in developed countries, while the effect is ambiguous in emerging economies. Also, military spending is capable of promoting the social welfare index based on the FMOLS estimation. The comparative analyses indicate that unlike in the G7, the effect of the growth of military spending on the growth of social welfare expenditures is negative and shorter in the BRICS.     

Military expenditure and economic growth in Middle Eastern countries and Turkey: a non-linear panel data approach

The economic growth effects of military expenditure have been the subject of a large literature in defence economics. Theories on the economic impacts of military expenditure greatly differ and include arguments that they either enhance economic growth or crowd out productive investments. Empirical literature on defence expenditure and economic growth nexus generally employs linear specifications to investigate the impact of defence expenditures on economic growth. Although it is now well established that many economic variables may have a non-linear data-generating mechanism, it seems that this reality has long been neglected in empirical work on defence–growth nexus. This paper attempts to fill this gap by employing non-linear panel data models to examine the effects of military expenditures on economic growth for Middle Eastern countries and Turkey, for the time period 1988–2012. Results show that the effect of military expenditure on economic growth is nonlinear such that the state of the economy actually determines the effect of the former on the latter. This is important not only in showing asymmetric relationship between these variables but also in revealing the reasons of mixed results of earlier literature.     

DEFENSE SPENDING AND ECONOMIC GROWTH IN TURKEY: A LINEAR AND NON‐LINEAR GRANGER CAUSALITY APPROACH

This paper uses linear and non‐linear Granger causality methods to determine the causal relationship between defense spending and economic growth in Turkey for the period 1949–2004. The innovative feature of this paper is that it provides evidence regarding the nonlinear causal dependence between military spending and economic growth in Turkey. The empirical results contribute to the empirical literature by indicating support for both linear and non‐linear causality between military expenditures and economic development and they may prove useful in theoretical and empirical research by regulators and policy makers.     

Budget allocation,national security,military intelligence,and human capital: a dynamic model

This study develops a dynamic model that integrates military intelligence into the defense capability of the country and the optimal allocation of its government budget. We assert that the effectiveness of the country’s military intelligence is contingent on the quality of its human capital, which, in turn, implies a long-term positive relationship between the government’s various civilian expenditures and its capacity to achieve a cost-effective intelligence and, hence, military capability. This relationship is developed within a multiple-period arms race model between two rivals. Using this model and stylized data for the Israeli–Syrian arms race, we show that an appropriate budget shift from defense to civilian expenditures during the initial periods of the planning horizon will gradually (over a decade, say) increase the quality of human capital in the country and, thus, the effectiveness of its intelligence, which, in turn, will increase the country’s future security and welfare.     

Dangerous work: Terrorism against U.S. diplomats

The goal of diplomats is to represent their countries’ interests through diplomacy, not arms. Because they are not military personnel, they may be perceived as at lower risk of being the target of terrorists. However, recent events have called this perception into question. Despite this danger, there has been little research on terrorist attacks against diplomats. Drawing on the terrorism studies literature, this article argues that diplomats are targeted more than non-diplomatic targets in countries where certain U.S. foreign policies are implemented. An empirical analysis of 471 attacks against U.S. diplomats from 1970 to 2011 reveals that while U.S. alliances and foreign aid increase the likelihood of attacks against diplomats, U.S. military intervention and civil war, on the other hand, increase the risk of terrorism against non-diplomatic targets. This finding is relevant because it shows terrorist attacks against diplomats result from certain types of foreign policy.     

Do Military Expenditures Crowd-out Health Expenditures? Evidence from around the World, 2000–2013

Abstract

The paper examines the relationship between health and military expenditures using pooled cross-sectional (197 countries) and time series (2000–2013) data. Simultaneous equation models were employed to estimate the relationship between an array of public sector expenditures in order to address potential endogeneity. Our empirical findings strongly support the crowding-out hypothesis whereby increased military expenditures reduce the capacity of government to direct expenditures to health expenditures. These findings were robust to alternative specifications explored in the sensitivity analyses. Compared with upper-middle-income countries, the crowding-out effect became more pronounced among lower-middle-income countries. Consequently, this study shows that increased military expenditures negatively impacts health expenditures, and therefore poses as an important risk factor for population health and individual well-being. Moreover, it is the poorest of nations that are most sensitive to the negative effects of increased military expenditures.     

Military support and transnational terrorism

Analysing the relationship between the provision of military support and the probability of becoming the target of a terrorist attack, this paper contributes to the literature on the causes of transnational terrorism. We find that deployment of military troops of country X in country Y increases the probability of a terrorist attack on citizens of country X by a terrorist group located in country Y. Exporting weapons to country Y seems to increase the probability of being attacked by the terrorists of this country Y as well. Deploying materials, however, does not seem to significantly influence the probability of attack. Including lagged values for our military support variables ensures that the causality direction is from military support to terrorist attacks. Moreover, these results indicate that while the effect of military deployment on the probability of attack lasts for more than 1 year, the effect is rather short-lived.     

Military expenditures,economic growth and spatial spillovers

The relationship between economic growth and military expenditure has been the subject of a large literature in defence economics. This study analyses the influence of military expenditures on economic growth in a global perspective for the time period 2000–2010 taking spatial dimension into account. The augmented Solow model is employed to investigate the defence-growth nexus using the cross-sectional data relating to 128 countries. Following a traditional regression analysis, spatial variations in the relationships are examined utilizing different spatial econometric specifications estimated by maximum likelihood. The regressions are compared with each other via likelihood ratio tests, and the spatial Durbin model is found to be the most appropriate one suggesting that the typical least-squares model is misspecified. Empirical evidence indicates that military expenditure has a positive effect on economic growth with a significant spatial dependence for the time period under consideration.     

Allies with Benefits: US Effect on European Demand for Military Expenditures

This paper examines the security relationship between the US and Europe, focusing on potential spillin effects of US military expenditures on European demand for military expenditures during the early twenty-first century. The goal is to test whether or not European states view US expenditures as a complement or as a substitute to their own military expenditures. Past work in this area has found mixed results concerning the effect of US military expenditures, but focus strictly on the spillins within a formal alliance, specifically NATO, and use a time series dominated by Cold War dynamics. This study differentiates itself by accounting for both US total military expenditures and its regional expenditures through incorporation of US military base and personnel deployments across Europe. Additionally, this paper uses government revenue in its estimation to mitigate potential endogeneity. Findings using Arellano–Bond dynamic panel analysis suggest that there is a strong probability of substitution among European states.     

Military deployment and international terrorism: do location and mission type matter?

Extant literature documents a relationship between military deployment and the risk of an international terrorist attack against citizens of the deploying country. It appears that deployment significantly increases the possibility of terrorist actions in the home country. In particular, if country A decides to send troops to nation B, then citizens of the former country are more likely to fall victim of an attack carried out by a terrorist organisation originating from the latter country. Contributing to this line of literature, we further refine this relationship by distinguishing between regions where the troops are sent as well as by introducing differences between types of deployment. Our results indicate that missions to Asia and the Middle East are more dangerous than missions to other regions as reflected by the terrorist threat in the home country. Robustness tests do however show that the significance of the location variable Asia is predominantly attributed to the mission to Afghanistan. As for types of deployment, only ad hoc missions seem to increase the risk of an attack, whereas no significant results are found for other missions such as operations under UN and NATO flag. Leaving out the missions to Iraq and Afghanistan however also increases the danger resulting from missions by fixed coalitions. Our results find however no evidence that ‘wearing a blue helmet’ increases the probability of a terrorist attack at home.     

The nexus between military expenditures and economic growth in the BRICS and the US: an empirical note

This empirical note re-examines the causal linkages between military expenditures and economic growth for the BRICS countries (Brazil, Russia, India, China, and South Africa) and that for the USA during the period 1988–2012. Results of Granger causality tests show that military expenditures influence economic growth in the USA, economic growth influences military expenditures in both Brazil and India, a feedback between military expenditures and economic growth in Russia, and no causal relation exists between military expenditures and economic growth in China and South Africa. The findings of this study can provide important policy implications for the BRICS countries and also for the USA.     

Military expenditure and the profit rate in Greece

This paper examines the effect of military expenditure on the profitability of the Greek economy for the 1962-1994 period. In the theoretical debate on the role of military expenditures they have alternatively been viewed either as a "burden on growth" (i.e. an unproductive drain of resources) or as a stimulating factor for demand, profitability and economic performance. This distinction is reflected in the Marxist tradition as well where in different theories of crisis, military expenditures have been treated either as an unproductive burden or as a savior of the capitalist system, mainly through their effect on the rate of profit. Our empirical tests for the relationship between military expenditure, the general Marxian rate of profit and the net rate of profit indicate that those expenditures have had a contradictory effect on profitability, stimulating effective demand in the short run, but affecting negatively both rates of profit over the long run.     

Panel Causality Analysis Between Defence Expenditure and Economic Growth in Developed Countries

There is much controversy in the literature over whether military expenditures have a positive, negative or no relation impact on economic growth. The aim of this paper is to determine the relationship between GDP and defence expenditure. The study analyses GDP and defence expenditures of the developed countries with cross-sectional ADF and SURADF unit root tests using annual data for the years 1980–2007. We conclude that in the long term, according to the Pedroni cointegration test, there exists a relationship between defence expenditure and economic growth. Furthermore, by utilizing the Granger causality test, we find that defence expenditure is a factor in economic growth. In other words, our study validates the hypothesis that defence spending by economically developed countries positively contributes to their economics.     

Military expenditure and income distribution in South Korea

This paper attempts to investigate the long-run and the causal relationship between military expenditure and income distribution in South Korea for the period 1965–2011. Applying the bounds test approach to cointegration, we found a long-run relationship between military expenditure and the Gini coefficient with military expenditure having a positive and a statistically significant impact on income inequality. A 1% rise in military expenditure increased the Gini coefficient by 0.38%. Application of the lag-augmented causality test also reveals a unidirectional causality running from military expenditure to income inequality. The evidence seems to suggest that devoting more resources to the military sector may further worsen income inequality in South Korea.     

Pricing war within a real option framework∗

The aim of this paper is to provide insights on war spending using simple tools of financial calculus rather than developing a general theory. Combining Grossman and Han's theory of war finance with the empirical literature that displays a straightforward relationship between the real value of money and wartime military events, we advocate the use of the real option approach of war spending. Some calculations and an empirical example illustrate this approach.     

Budgetary Trade-Offs Between Defense,Education and Health Expenditures: The Case of Turkey

The main objective of this paper is to evaluate empirically the existence of a budgetary trade-off between military, education and health expenditures in Turkey for the time period 1925-1998. Development economists, peace and defense economists and political economists have extensively investigated the existence of a trade-off between military, education and health spending since the 1970s. However, the literature review reveals that it is hard to establish a general theory of budgetary trade-off between military, education and health spending and make this applicable for all cases. This is mostly due to economic, social, political, and historical differences among the countries Moreover, it is likely that different research techniques, different time periods analyzed may produce different results. As a result of this, researchers have found a variety of outcomes regarding the trade-off between defense-education and health expenditures. This study presents a brief literature review within the framework of trade-offs between defense-education and health expenditures and also concentrates on theoretical model development. The discussion will center on developing a multi-variable single equation regression model and presenting estimable forms of equations.