Military Burden, Security Needs, and Economic Growth in the Middle East

Abstract

Economic theory and existing empirical studies do not unambiguously indicate whether higher military expenditures retard or promote economic growth, nor have there been systematic attempts to discern the sources of military spending to help determine how much of that spending can realistically be reduced. This article examines the theoretical link between military spending and economic growth, explores the domestic and regional causes of this spending, and tests a model incorporating a simultaneous relationship between military spending and economic growth in a pooled time-series cross-sectional analysis on various groupings of Middle Eastern states. While the analysis is shown sensitive to assumptions about causality and the numerous problems of pooled data, the results indicate that higher military spending has suppressed economic growth in the Middle East region even when alternative measures of the military burden are used.