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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.

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  • 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. Deger, Saadet & Sen, Somnath, 1995. "Military expenditure and developing countries," Handbook of Defense Economics, in: Keith Hartley & Todd Sandler (ed.), Handbook of Defense Economics, edition 1, volume 1, chapter 11, pages 275-307, Elsevier.
    2. 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.
    3. Ram, Rati, 1995. "Defense expenditure and economic growth," Handbook of Defense Economics, in: Keith Hartley & Todd Sandler (ed.), Handbook of Defense Economics, edition 1, volume 1, chapter 10, pages 251-274, Elsevier.
    4. 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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    1. Dimitrios Dimitriou & Eleftherios Goulas & Christos Kallandranis & Konstantinos Drakos, 2025. "Military Expenditures and Economic Growth: Evidence from NATO and Non-NATO Alliances," Defence and Peace Economics, Taylor & Francis Journals, vol. 36(3), pages 324-348, April.

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