The relationship between defense spending economic growth and government expenditures in developing countries

In this study, macroeconomic variables such as economic growth, public expenditures, military expenditures and life expectancy of 37 developing countries, including Turkey, between 1997-2021 were examined by panel data analysis method. The main purpose of the study is to analyze the effects of these variables on economic growth and to make inferences about applicable public policies for developing countries. In the analysis process, it was determined that there was a significant cross-sectional dependency between countries by using Breusch-Pagan LM and Pesaran CD tests. Unit root tests (Levin, Lin, and Chu; Im, Pesaran and Shin; ADF-Fisher; PP-Fisher) and it was determined that some of the variables became stationary when their first differences were taken. As a result of the cointegration tests, it was seen that there was a long-term relationship between the variables. Hausman test was applied in model selection and random effects model (RE) was preferred. However, due to the presence of heteroskedasticity problem, the Feasible Generalized Least Squares (FGLS) method was used to obtain the most reliable estimates. The findings show that life expectancy and public expenditures affect economic growth positively and significantly. In addition, it has been determined that military expenditures have a positive and significant effect on growth. These results contradict the view of Neo-Classical economic theory that government spending can adversely affect growth and support the Benoit hypothesis. According to the Benoid hypothesis, defense spending can stimulate industrial development, support technological progress, and contribute to economic growth. The findings of this study reveal that military expenditures have a direct positive effect on economic growth. However, it is emphasized that in order for this effect to be sustainable, military expenditures should be integrated with industrial and technology investments. In line with the results obtained in the study, policy recommendations for developing countries are presented. Public resources need to be directed to areas that directly support growth, such as education, health and infrastructure. Defence expenditures should be integrated with industrial and technology investments that will stimulate economic growth and should be limited within the budget balance. Considering that economic structures differ between countries, policymakers need to develop country-specific strategies instead of homogeneous solutions. As a result, this study shows that military spending supports economic growth and confirms the Benoit hypothesis. However, it should not be forgotten that military expenditures alone should not be considered as the main element of economic growth, and budget resources should be used efficiently. Keywords: Economic Growth, Public Expenditures, Military Expenditures, Neo-Classical Approach, Benoid Hypothesis