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Democracy, military expenditure and economic growth: A heterogeneous perspective

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  • Xinyi Wang
  • Na Hou
  • Bo Chen

Abstract

Countries with different democratic levels tend to show various degrees of emphasis on military expenditure and a consensus can hardly be reached on the economic effect of democracy and military expenditure. By applying a panel vector autoregressive (PVAR) approach, this article examines the potential dynamic and endogenous relationships among democracy, military expenditure and economic growth of 126 countries from 1990 to 2020. Furthermore, the k-means clustering algorithm is employed to account for the heterogeneous interaction between democracy and military expenditure in different countries. The empirical results reveal that the strong positive impact of democracy and the negative effect of military spending on economic growth exists in the full sample and the cluster of countries with low democratic levels and a high military burden. For democratic countries with low military expenditure, there is a more significant and negative impact both of military expenditure on democracy and vice versa.

Suggested Citation

  • Xinyi Wang & Na Hou & Bo Chen, 2023. "Democracy, military expenditure and economic growth: A heterogeneous perspective," Defence and Peace Economics, Taylor & Francis Journals, vol. 34(8), pages 1039-1070, November.
    • Handle: RePEc:taf:defpea:v:34:y:2023:i:8:p:1039-1070
    DOI: 10.1080/10242694.2022.2126955
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    References listed on IDEAS

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    1. Dizaji, S.F., 2019. "The potential impact of oil sanctions on military spending and democracy in the Middle East," ISS Working Papers - General Series 644, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
    2. Dizaji, S.F. & Murshed, S.M., 2020. "The impact of external arms restrictions on democracy and conflict in developing countries," ISS Working Papers - General Series 128245, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
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