Military expenditure and economic growth in West and Central Africa: Empirical insights from a dynamic panel framework
DOI:
https://doi.org/10.25299/ijbs.2025.23066Keywords:
Fiscal Policy, Inflation rate, Labour Force Participation, Military Expenditure and Economic Growth, GDP GrowthAbstract
Purpose: This study investigates the nexus between military expenditure and economic growth in eight West and Central African countries (2000–2023). It addresses the ongoing debate about whether government spending on defense stimulates growth by enhancing security or stifles it by crowding out investments in social services and productive sectors.
Design/methodology/approach: A quantitative panel data analysis was conducted using the Panel Dynamic Ordinary Least Squares (DOLS) technique.
Findings: The military expenditure (% of GDP) showed a positive but statistically insignificant long-run relationship with economic growth. By implication, the military expenditure and economic growth nexus may be influenced by other, unobserved factors. Gross fixed capital formation and labour force participation were significant positive drivers of growth, with labour being the strongest contributor. Inflation exerted a negative, statistically insignificant effect on growth.
Limitations and Research implications: The statistical insignificance of military spending and inflation weakens causal inferences. Small sample size limits generalizability. Omitted variables (e.g., institutional quality, conflict intensity) may bias results. Key factors such as level of corruption, rule of law, and the nature of security threats will likely bias the results.
Practical Implications: Governments may cautiously increase military spending to leverage its positive (though weak) association with growth, but must avoid diverting funds from critical social sectors. Policymakers should prioritize human capital development (labour force quality) and physical infrastructure (capital formation), the primary growth engines identified. Central banks should tighten monetary policy (e.g., raise interest rates) to curb inflation’s growth-dampening effects.
Originality/value: This study provides novel empirical evidence on military-growth dynamics in understudied West/Central African economies. Challenges conventional "crowding-out" assumptions by revealing a non-harmful (though non-robust) link between defense spending and growth. Offers region-specific policy pathways for balancing security needs with human/physical capital investments.
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