Effect of Militarization Components on the Economic Growth of the Middle Eastern Countries: A New Approach to the Defense-Growth Relationship

Whilst numerous empirical studies have examined the relationship between military expenditures and economic growth, the present attempts to offer a new perspective on the subject by disaggregating militarization into its various components and analysing each component's constituent indicators. To achieve this purpose, the study employs an augmented Solow growth model and draws on statistical data from 11 Middle Eastern countries between the years 2000–2021.
The results obtained via panel cointegration analysis and the fully modified ordinary least squares (FMOLS) estimator indicates a negative and significant effect of military expenditure on economic growth. On the other hand, the components related to military personnel and the ratio of heavy weapons to the population have a positive and significant impact. The findings from further disaggregation of the expenditure components reveals a negative and significant effect of military spending as a percentage of GDP and the ratio of military spending to health expenditure on economic growth. When breaking down the personnel component, the results show a positive and significant effect of the ratio of military and paramilitary personnel to the population, as well as the ratio of military reserves to the population. However, the ratio of military and paramilitary personnel to the number of physicians has a negative impact on economic growth. Based on these findings, it can be concluded that the impact of militarization on economic growth depends on the composition of its components. Therefore, increases in financial and human resources dedicated to militarization should be accompanied by growth in other sectors that drive economic performance, such as health. Furthermore, defence spending should prioritize heavy and advanced weapons, alongside the enhancement of indigenous technology and knowledge in this field.