The comparison for the economic effects of defense expenditures on different income countries: Panel data analysis

There are different approaches explaining the affects of defense expenditures on the economic activities. Neoclassical Approach argues that defense expenditures adversely effect the countries' economy by creating crowding-out affects on more efficient investments. However, Military Keynesian Approach argues that defense expenditures provide positive externalities on the other sectors by creating technological spin-off affects. In this study, it is aimed to investigate the productivity differences between defense expenditures and the other public expenditures. This study also aims to investigate the determinants of defense expenditure by examining the nature of these two type of expenditures. Additionally, it is intended to make more efficient inferences about selected countries by income groups and development levels given by World Bank. This study consists of four main parts. The first part gives theoretical information about the impact of defense expenditures on the economic growth and the determinants of defense expenditures. In the second part, the extent of defense expenditures has been given for the World and Turkey. In the third part, the methods used in the analysis, (Panel Data Regression Method and Panel Cointegration Method) have been introduced. In the fourth part, the results of the analyses have been discussed in a detailed way. The results indicated that, the defense expenditures have positive influence on the economic growth for all country groups, but have inversely proportional to the development level of the countries. It is also concluded that the other public expenditures have more efficient than defense expenditures on economic activities. Keywords: Defense Expenditures, Externality, Panel Data Analysis, Turkey