Contradictory public expenditures in Low-Income Countries: revisiting the military versus health spending dilemma

The objective of this study is to analyze the trade-offs in the allocation of public resources between the defense and health sectors in Low-Income Countries (LICs), some of which are fragile and affected by multifaceted conflicts. Using panel data covering 22 LICs over the period 1996–2022, the study employs a simultaneous equations modeling framework, estimated using a two-stage least squares method, to account for simultaneity and endogeneity issues. Results highlight a crowding-out effect between military and health spending. Specifically, increased military spending is associated with a significant decrease in public health spending, while increased health spending also tends to constrain defense spending, thus revealing a bidirectional budgetary trade-off. This effect is significantly more pronounced in fragile and conflict-affected countries, where security pressures lead to increased military spending at the expense of investment in the health sector. Furthermore, the intensity of conflicts reinforces defense spending, further reallocating public resources toward security priorities. Further analyses distinguishing between low-and middle-income countries confirm these results.