Abstract:

Defense spending is born out of necessity. The amount and composition of defense expenditures differ according to the geographical locations and political perspectives of the countries. However, the effect of defense expenditures on growth has been a subject that has been extensively researched. In this study, first of all, the effects of defense expenditures on the defense industry and possible growth channels are discussed. With the aim of establishing a national independent defense industry, states can give incentives to these areas. Behind these incentives lies the reduction of military economic dependence, as well as supporting the private sector and stimulating economic growth.. In the study, using the data of 35 OECD countries between 2005 and 2019, the effect of defense expenditures on economic growth through the causality relationship with GDP was examined with the help of panel data causality analysis. The results of the analysis showed that defense expenditures will adversely affect economic growth in the long run. However, it should be noted that the results reflect a general situation. It is thought that the differences in the development levels of the countries, arms imports and the connections of the defense industry with other sectors may be effective on growth.

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