Theoretical and Empirical Literature of The Relationship Between Defense Expenditures and Economic Growth

Abstract

In the economics literature, it is considered that defense expenditure, which is characterized as public spending, may negatively affect growth either by crowding out effect of investments within the framework of the Neo-Classical Approach, or positively affect economic growth by increasing aggregate demand within the framework of the Keynesian Approach. Benoit examined the connection among defense expenditures and economic growth in developing countries in his study in 1973 and he revealed the existence of a positive relationship among the variables. This result has been described as the Benoit Hypothesis in the economics literature. Within the framework of the Benoit Hypothesis, the relationship between variables was studied in many academic articles. However, the findings obtained in the empirical literature made a difference, and a common conclusion could not be reached about the validity of the hypothesis. In this study, it is aimed to bring together the theoretical and empirical findings on the relationship between militariy expenditures and growth.