Relationships between Military Spending and Green Capital Formation: Complementary or Substitutes?

Abstract

The world’s so-called rich countries have still been spending a huge sum of their budgets on military heads, in spite of there being no such fears of multilateral formal wars. Further, there is no such strong evidence that military expenditures are capable of raising the GDPs of the concerned countries. The countries, as a result, have been squeezing allotments in their budgets upon real asset building spending such as on the social sectors and natural resource development. There is thus a trade-off between military spending and real asset building. The present study examines the long-run relationships with causal interplays between military spending and green capital and also identifies the crowds-in or crowds-out effects of military spending on green capital in the top 20 military power-owning countries for the period 1991–2020. The results show the existence of long-run relations between the two in the majority of the countries and military spending makes a cause to green capital in the long run. But, for a few countries, the study observes causal interplay between military heads and green capital heads. Finally, the study finds that the militarization practices crowd out the green capital formation in eight countries and the opposite outcome, the crowding-in effects, works in twelve countries.