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<p>This article investigates the relationship between military expenditure and economic growth by utilizing a balanced panel dataset comprising 14 EU countries, the United States, and Israel over the period 1995–2022. The empirical analysis employs the two-step Generalized Method of Moments (GMM) estimator to address potential endogeneity and omitted variable bias, ensuring robust and consistent estimations. The model incorporates explanatory variables such as total government spending, foreign direct investment (FDI), current account balance, inflation, and military expenditure. The findings suggest that military spending exerts a multifaceted impact on economic growth, with both positive and negative effects depending on country-specific characteristics and time periods. Moreover, government expenditure and FDI are confirmed as significant determinants of growth performance. By controlling for time-invariant heterogeneity and external shocks, the study contributes to the ongoing academic debate in a theoretically contested field, offering empirical insights into the strategic balance between defense priorities and the productive investments required for a knowledge-based economy.</p>

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Military Spending and Economic Growth: A Panel Data Analysis

  • 期刊论文

  • 出版模式：

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  • 发表日期：

    2026年6月22日

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  • Nikolaos Stamatelopoulos,
  • Athanasios Anastasiou,
  • Elpida Samara,
  • Pavlos Kilintzis,
  • Zacharias Dermatis

摘要

This article investigates the relationship between military expenditure and economic growth by utilizing a balanced panel dataset comprising 14 EU countries, the United States, and Israel over the period 1995–2022. The empirical analysis employs the two-step Generalized Method of Moments (GMM) estimator to address potential endogeneity and omitted variable bias, ensuring robust and consistent estimations. The model incorporates explanatory variables such as total government spending, foreign direct investment (FDI), current account balance, inflation, and military expenditure. The findings suggest that military spending exerts a multifaceted impact on economic growth, with both positive and negative effects depending on country-specific characteristics and time periods. Moreover, government expenditure and FDI are confirmed as significant determinants of growth performance. By controlling for time-invariant heterogeneity and external shocks, the study contributes to the ongoing academic debate in a theoretically contested field, offering empirical insights into the strategic balance between defense priorities and the productive investments required for a knowledge-based economy.