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Military Spending and Economic Development: Evidence from the MENA Region

Abstract:

Military spending can have positive or negative impact on economies. In the empirical literature, there is evidence for both hypotheses. In practice, the effect of military spending on the economy will depend on the geographic context and the type of military spending. The Middle East and North Africa (MENA) region is composed of a group of countries with high military spending. This chapter examines the relationship between military expenditure in MENA countries with a set of economic, social, and institutional indicators. Our results show a growing military spending in the region. One possible explanation is the constant conflicts, ethnic, cultural, and religious tensions. Additionally, our findings highlight a possible link between military spending, natural resources, human capital, and economic development. Policymakers in the MENA region have to cope with the international drop in oil prices and the slowdown in several economies. The promotion of foreign investment aimed at improving the endowment of human capital through technology transfer and the improvement of the national productive capacity could promote the achievement of the region's sustainable development objectives.