IDEAS home Printed from https://ideas.repec.org/a/bpj/pepspp/v29y2023i1p19-42n5.html
   My bibliography  Save this article

Revisiting the Military Expenditure-Growth Nexus: Does Institutional Quality Moderate the Effect?

Author

Listed:
  • Dada James Temitope

    (Economics, Obafemi Awolowo University, Ile-Ife, Nigeria)

  • Awoleye Emmanuel Olayemi

    (Economics, Hallmark University, Ijebu Itele, Ijebu, Ogun, Nigeria)

  • Arnaut Marina

    (University of Dubai, Dubai, United Arab Emirates)

  • Al-Faryan Mamdouh Abdulaziz Saleh

    (School of Accounting, Economics and Finance, University of Portsmouth, Faculty of Business and Law, Richmond Building, Portland Street, Portsmouth, Hampshire PO1 3DE, UK)

Abstract

The purpose of this study is to examine the moderating role and threshold level of institutional quality in the nexus between military expenditure and economic growth for a panel of 31 African nations. The results reveal that military expenditure negatively influences growth, while institutional quality positively affects growth. The interactive term of institutional quality and military expenditure significantly positively influence economic growth. However, the threshold level of institutional quality for military expenditure to translate into economic growth in the region is found to be 4.61 on an ordinary scale of 0–10, although most countries operate below the threshold point of institutional quality. The study concludes that strong institutional quality serves as important absorptive capacity for military expenditure to drive economic growth in the region.

Suggested Citation

  • Dada James Temitope & Awoleye Emmanuel Olayemi & Arnaut Marina & Al-Faryan Mamdouh Abdulaziz Saleh, 2023. "Revisiting the Military Expenditure-Growth Nexus: Does Institutional Quality Moderate the Effect?," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 29(1), pages 19-42, February.
    • Handle: RePEc:bpj:pepspp:v:29:y:2023:i:1:p:19-42:n:5
    DOI: 10.1515/peps-2022-0027
    as

    Download full text from publisher

    File URL: https://doi.org/10.1515/peps-2022-0027
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.1515/peps-2022-0027?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. repec:bgu:wpaper:163 is not listed on IDEAS
    2. Muhammad Shahbaz & Talat Afza & Muhammad Shahbaz Shabbir, 2013. "Does Defence Spending Impede Economic Growth? Cointegration And Causality Analysis For Pakistan," Defence and Peace Economics, Taylor & Francis Journals, vol. 24(2), pages 105-120, April.
    3. Nikolaos Mylonidis, 2008. "Revisiting The Nexus Between Military Spending And Growth In The European Union," Defence and Peace Economics, Taylor & Francis Journals, vol. 19(4), pages 265-272.
    4. Mie Augier & Robert McNab & Jerry Guo & Phillip Karber, 2017. "Defense spending and economic growth: evidence from China, 1952–2012," Defence and Peace Economics, Taylor & Francis Journals, vol. 28(1), pages 65-90, January.
    5. Jun Ando, 2018. "Externality of Defense Expenditure in the United States: A New Analytical Technique to Overcome Multicollinearity," Defence and Peace Economics, Taylor & Francis Journals, vol. 29(7), pages 794-808, November.
    6. Shahbaz, Muhammad & Hoang, Thi Hong Van & Mahalik, Mantu Kumar & Roubaud, David, 2017. "Energy consumption, financial development and economic growth in India: New evidence from a nonlinear and asymmetric analysis," Energy Economics, Elsevier, vol. 63(C), pages 199-212.
    7. Oana Ramona Lobont & Oana Ramona Glont & Leonardo Badea & Sorana Vatavu, 2019. "Correlation of military expenditures and economic growth: lessons for Romania," Quality & Quantity: International Journal of Methodology, Springer, vol. 53(6), pages 2957-2968, November.
    8. Russett, Bruce M., 1969. "Who Pays for Defense? 1," American Political Science Review, Cambridge University Press, vol. 63(2), pages 412-426, June.
    9. Thilo Klein, 2004. "Military expenditure and economic growth: peru 1970-1996," Defence and Peace Economics, Taylor & Francis Journals, vol. 15(3), pages 275-288.
    10. Joshua Aizenman & Reuven Glick, 2006. "Military expenditure, threats, and growth," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 15(2), pages 129-155.
    11. Ryan A. Compton & Bryan Paterson, 2016. "Military Spending and Growth: The Role of Institutions," Defence and Peace Economics, Taylor & Francis Journals, vol. 27(3), pages 301-322, June.
    12. Taiwo Akinlo & James Temitope Dada, 2021. "The moderating effect of foreign direct investment on environmental degradation-poverty reduction nexus: evidence from sub-Saharan African countries," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 23(11), pages 15764-15784, November.
    13. John Paul Dunne, 2012. "Military Spending, Growth, Development And Conflict," Defence and Peace Economics, Taylor & Francis Journals, vol. 23(6), pages 549-557, December.
    14. Albalate, Daniel & Bel, Germà & Elias, Ferran, 2012. "Institutional determinants of military spending," Journal of Comparative Economics, Elsevier, vol. 40(2), pages 279-290.
    15. Charles Shaaba Saba & Nicholas Ngepah, 2019. "A cross-regional analysis of military expenditure, state fragility and economic growth in Africa," Quality & Quantity: International Journal of Methodology, Springer, vol. 53(6), pages 2885-2915, November.
    16. Mariem Brahim & Houssem Rachdi, 2014. "Foreign Direct Investment, Institutions and Economic Growth: Evidence from the MENA Region," Journal of Reviews on Global Economics, Lifescience Global, vol. 3, pages 328-339.
    17. Mohammad Reza Farzanegan, 2014. "Military Spending and Economic Growth: The Case of Iran," Defence and Peace Economics, Taylor & Francis Journals, vol. 25(3), pages 247-269, June.
    18. Giorgio d’Agostino & John Paul Dunne & Luca Pieroni, 2012. "Corruption, Military Spending And Growth," Defence and Peace Economics, Taylor & Francis Journals, vol. 23(6), pages 591-604, December.
    19. Clement Olalekan Olaniyi & Sunday Idowu Oladeji, 2021. "Moderating the effect of institutional quality on the finance–growth nexus: insights from West African countries," Economic Change and Restructuring, Springer, vol. 54(1), pages 43-74, February.
    20. Ajide, Folorunsho M. & Osinubi, Tolulope T. & Dada, James T., 2021. "Economic Globalization, Entrepreneurship, and Inclusive Growth in Africa," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 36(4), pages 689-717.
    21. Hannah Galvin, 2003. "The impact of defence spending on the economic growth of developing countries: A cross-section study," Defence and Peace Economics, Taylor & Francis Journals, vol. 14(1), pages 51-59.
    22. Temitope DADA, James & FANOWOPO, Oyinkansola, 2020. "Economic Growth And Poverty Reduction In Nigeria: The Role Of Institutions," Ilorin Journal of Economic Policy, Department of Economics, University of Ilorin, vol. 7(7), pages 1-15, June.
    23. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
    24. Pieroni Luca & d'Agostino Giorgio, 2009. "Military Spending, Corruption and Economic Growth," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 14(3), pages 1-14, March.
    25. Taiwo Akinlo & James Temitope Dada, 2022. "Information technology, real sector and economic growth in sub-Saharan Africa: a cross-sectional dependence approach," Quality & Quantity: International Journal of Methodology, Springer, vol. 56(6), pages 4241-4267, December.
    26. Eduardo Morales-Ramos, 2002. "Defence R&D expenditure: The crowding-out hypothesis," Defence and Peace Economics, Taylor & Francis Journals, vol. 13(5), pages 365-383.
    27. Charles Shaaba Saba & Nicholas Ngepah, 2019. "Military expenditure and economic growth: evidence from a heterogeneous panel of African countries," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 32(1), pages 3586-3606, January.
    28. Acemoglu, Daron & Johnson, Simon & Robinson, James A., 2005. "Institutions as a Fundamental Cause of Long-Run Growth," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 6, pages 385-472, Elsevier.
    29. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 407-437.
    30. Biswas, Amit K. & Farzanegan, Mohammad Reza & Thum, Marcel, 2012. "Pollution, shadow economy and corruption: Theory and evidence," Ecological Economics, Elsevier, vol. 75(C), pages 114-125.
    31. Benoit, Emile, 1978. "Growth and Defense in Developing Countries," Economic Development and Cultural Change, University of Chicago Press, vol. 26(2), pages 271-280, January.
    32. Ying Zhang & Xiaoxing Liu & Jiaxin Xu & Rui Wang, 2017. "Does military spending promote social welfare? A comparative analysis of the BRICS and G7 countries," Defence and Peace Economics, Taylor & Francis Journals, vol. 28(6), pages 686-702, November.
    33. J. Paul Dunne & Ron Smith & Dirk Willenbockel, 2005. "Models Of Military Expenditure And Growth: A Critical Review," Defence and Peace Economics, Taylor & Francis Journals, vol. 16(6), pages 449-461.
    34. Law, Siong Hook & Kutan, Ali M. & Naseem, N.A.M., 2018. "The role of institutions in finance curse: Evidence from international data," Journal of Comparative Economics, Elsevier, vol. 46(1), pages 174-191.
    35. Abu-Bader, Suleiman & Abu-Qarn, Aamer S., 2003. "Government expenditures, military spending and economic growth: causality evidence from Egypt, Israel, and Syria," Journal of Policy Modeling, Elsevier, vol. 25(6-7), pages 567-583, September.
    36. Effiong, Ekpeno, 2015. "Financial Development, Institutions and Economic Growth: Evidence from Sub-Saharan Africa," MPRA Paper 66085, University Library of Munich, Germany.
    37. J. Paul Dunne & Nan Tian, 2016. "Military expenditure and economic growth, 1960–2014," Economics of Peace and Security Journal, EPS Publishing, vol. 11(2), pages 50-56, October.
    38. John C. Driscoll & Aart C. Kraay, 1998. "Consistent Covariance Matrix Estimation With Spatially Dependent Panel Data," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 549-560, November.
    39. Alptekin, Aynur & Levine, Paul, 2012. "Military expenditure and economic growth: A meta-analysis," European Journal of Political Economy, Elsevier, vol. 28(4), pages 636-650.
    40. Busse, Matthias & Hefeker, Carsten, 2007. "Political risk, institutions and foreign direct investment," European Journal of Political Economy, Elsevier, vol. 23(2), pages 397-415, June.
    41. Daron Acemoglu & Simon Johnson, 2005. "Unbundling Institutions," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 949-995, October.
    42. Asongu, Simplice A. & Nwachukwu, Jacinta C., 2017. "The Impact of Terrorism on Governance in African Countries," World Development, Elsevier, vol. 99(C), pages 253-270.
    43. Ehigiamusoe, Kizito Uyi & Lean, Hooi Hooi & Smyth, Russell, 2020. "The moderating role of energy consumption in the carbon emissions-income nexus in middle-income countries," Applied Energy, Elsevier, vol. 261(C).
    44. J. Paul Dunne & Nan Tian, 2015. "Military Expenditure, Economic Growth and Heterogeneity," Defence and Peace Economics, Taylor & Francis Journals, vol. 26(1), pages 15-31, February.
    45. Olumuyiwa Tolulope APANISILE & Olalekan Charles OKUNLOLA, 2014. "An Empirical Analysis Of Effects Of Military Spending On Economic Growth In Nigeria: A Bound Testing Approach To Co-Integration 1989-2013," Journal of Public Administration, Finance and Law, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 6(6), pages 117-130, December.
    46. Muhammed Umar Aminu & Muhammed Umar Aminu & Abu Sufian Abu Bakar, 2016. "The Interactional Impact of Defense Expenditure and Arms Importation on Economic Growth in Nigeria: An Autoregressive Approach," International Journal of Economics and Financial Issues, Econjournals, vol. 6(2), pages 538-543.
    47. Jülide Yildirim & Nadir Öcal, 2016. "Military expenditures, economic growth and spatial spillovers," Defence and Peace Economics, Taylor & Francis Journals, vol. 27(1), pages 87-104, February.
    48. James Temitope Dada & Taiwo Akinlo, 2021. "Foreign direct investment and poverty reduction in sub-Saharan Africa: does environmental degradation matter?," Future Business Journal, Springer, vol. 7(1), pages 1-10, December.
    49. Raquel Almeida Ramos & Rafael Ranieri & Jan-Willem Lammes, 2013. "Mapping Inclusive Growth," Working Papers 105, International Policy Centre for Inclusive Growth.
    50. Pieroni, Luca, 2009. "Does defence expenditure affect private consumption? Evidence from the United States," Economic Modelling, Elsevier, vol. 26(6), pages 1300-1309, November.
    51. Chang, Hsin-Chen & Huang, Bwo-Nung & Yang, Chin Wei, 2011. "Military expenditure and economic growth across different groups: A dynamic panel Granger-causality approach," Economic Modelling, Elsevier, vol. 28(6), pages 2416-2423.
    52. Shin-Chyang Lee & Cheng-Te Lee & Shang-Fen Wu, 2016. "Military spending and growth: a small open economy stochastic growth model," Defence and Peace Economics, Taylor & Francis Journals, vol. 27(1), pages 105-116, February.
    53. Giorgio d’Agostino & J. Paul Dunne & Luca Pieroni, 2017. "Does Military Spending Matter for Long-run Growth?," Defence and Peace Economics, Taylor & Francis Journals, vol. 28(4), pages 429-436, July.
    54. Peter Batchelor & J. Paul Dunne & David Saal, 2000. "Military spending and economic growth in South Africa," Defence and Peace Economics, Taylor & Francis Journals, vol. 11(4), pages 553-571.
    55. Chien‐Hsun Chen, 1993. "Causality between Defence Spending and Economic Growth: The Case of Mainland China," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 20(6), pages 1-1, June.
    56. Ward, Michael D. & Davis, David R., 1992. "Sizing up the Peace Dividend: Economic Growth and Military Spending in the United States, 1948–1996," American Political Science Review, Cambridge University Press, vol. 86(3), pages 748-755, September.
    57. Giorgio d’Agostino & J. Paul Dunne & Marco Lorusso & Luca Pieroni, 2020. "Military Spending, Corruption, Persistence and Long Run Growth," Defence and Peace Economics, Taylor & Francis Journals, vol. 31(4), pages 423-433, June.
    58. James Temitope Dada & Ezekiel Olamide Abanikanda, 2022. "The moderating effect of institutions in foreign direct investment led growth hypothesis in Nigeria," Economic Change and Restructuring, Springer, vol. 55(2), pages 903-929, May.
    59. JP Dunne & E Nikolaidou & R Smith, 2002. "Military Spending, Investment And Economic Growth In Small Industrialising Economies," South African Journal of Economics, Economic Society of South Africa, vol. 70(5), pages 789-790, June.
    60. Adam Coutts & Adel Daoud & Ali Fakih & Walid Marrouch & Bernhard Reinsberg, 2019. "Guns and butter? Military expenditure and health spending on the eve of the Arab Spring," Defence and Peace Economics, Taylor & Francis Journals, vol. 30(2), pages 227-237, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Efayena Obukohwo Oba & Olele Enoh Hilda, 2024. "Analysis of the Relationship Between Military Expenditure and Investment in the Economic Community of West African States: A Heterogeneous Panel Data Approach," Studia Universitatis „Vasile Goldis” Arad – Economics Series, Sciendo, vol. 34(4), pages 58-77.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Innocent.U. Duru & Millicent Adanne Eze & Bartholomew.O.N. Okafor & Abubakar Yusuf & Lawrence.O. Ede & Abubakar Sadiq Saleh, 2021. "Military Outlay and Economic Growth: The Scenarios of Lake Chad Basin Countries of the Republic of Chad and Nigeria," Growth, Asian Online Journal Publishing Group, vol. 8(1), pages 12-26.
    2. Alessandra Cepparulo & Paolo Pasimeni, 2024. "Defence Spending in the European Union," European Economy - Discussion Papers 199, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    3. Charles Shaaba Saba & Nicholas Ngepah, 2019. "Military expenditure and economic growth: evidence from a heterogeneous panel of African countries," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 32(1), pages 3586-3606, January.
    4. Duygu Yolcu Karadam & Nadir Öcal & Jülide Yildirim, 2023. "Distinct Asymmetric Effects of Military Spending on Economic Growth for Different Income Groups of Countries," Defence and Peace Economics, Taylor & Francis Journals, vol. 34(4), pages 477-494, May.
    5. Shakoor Ahmed & Khorshed Alam & Afzalur Rashid & Jeff Gow, 2020. "Militarisation, Energy Consumption, CO2 Emissions and Economic Growth in Myanmar," Defence and Peace Economics, Taylor & Francis Journals, vol. 31(6), pages 615-641, August.
    6. Charles Shaaba Saba & Nicholas Ngepah, 2022. "Nexus between defence spending, economic growth and development: evidence from a disaggregated panel data analysis," Economic Change and Restructuring, Springer, vol. 55(1), pages 109-151, February.
    7. Kyriakos Emmanouilidis & Christos Karpetis, 2020. "The Defense–Growth Nexus: A Review of Time Series Methods and Empirical Results," Defence and Peace Economics, Taylor & Francis Journals, vol. 31(1), pages 86-104, January.
    8. Christos Kollias & Suzanna-Maria Paleologou, 2019. "Military spending, economic growth and investment: a disaggregated analysis by income group," Empirical Economics, Springer, vol. 56(3), pages 935-958, March.
    9. Kyriakos Emmanouilidis & Christos Karpetis, 2022. "Cross–Country Dependence, Heterogeneity and the Growth Effects of Military Spending," Defence and Peace Economics, Taylor & Francis Journals, vol. 33(7), pages 842-856, October.
    10. Sefa Awaworyi Churchill & Siew Ling Yew, 2018. "The effect of military expenditure on growth: an empirical synthesis," Empirical Economics, Springer, vol. 55(3), pages 1357-1387, November.
    11. Lukasz Wiktor Olejnik, 2023. "Economic growth and military expenditure in the countries on NATOʼs Eastern flank in 1999–2021," Bank of Estonia Working Papers wp2023-2, Bank of Estonia, revised 09 May 2023.
    12. Khalid Zaman, 2019. "Does higher military spending affect business regulatory and growth specific measures? Evidence from the group of seven (G-7) countries," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 36(1), pages 323-348, April.
    13. Ricardo Ferraz, 2022. "The Portuguese Military Expenditure from a Historical Perspective," Defence and Peace Economics, Taylor & Francis Journals, vol. 33(3), pages 347-365, April.
    14. Jülide Yildirim & Nadir Öcal, 2016. "Military expenditures, economic growth and spatial spillovers," Defence and Peace Economics, Taylor & Francis Journals, vol. 27(1), pages 87-104, February.
    15. Andrew Phiri, 2019. "Does Military Spending Nonlinearly Affect Economic Growth in South Africa?," Defence and Peace Economics, Taylor & Francis Journals, vol. 30(4), pages 474-487, June.
    16. Charles Shaaba Saba & Nicholas Ngepah, 2022. "Nexus between telecommunication infrastructures, defence and economic growth: a global evidence," Netnomics, Springer, vol. 22(2), pages 139-177, October.
    17. Garfinkel, Michelle R. & Skaperdas, Stergios (ed.), 2012. "The Oxford Handbook of the Economics of Peace and Conflict," OUP Catalogue, Oxford University Press, number 9780195392777.
    18. Isiaka Akande Raifu & Alarudeen Aminu, 2023. "The effect of military spending on economic growth in MENA: evidence from method of moments quantile regression," Future Business Journal, Springer, vol. 9(1), pages 1-21, December.
    19. Nusrate Aziz & M. Niaz Asadullah, 2017. "Military spending, armed conflict and economic growth in developing countries in the post-Cold War era," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 44(1), pages 47-68, January.
    20. Kyriakos Emmanouilidis, 2024. "Military Spending and Economic Output: A Decomposition Analysis of the US Military Budget," Defence and Peace Economics, Taylor & Francis Journals, vol. 35(2), pages 243-263, February.

    More about this item

    Keywords

    military expenditure; economic growth; institutional quality; Africa; threshold;
    All these keywords.

    JEL classification:

    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:pepspp:v:29:y:2023:i:1:p:19-42:n:5. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.