The Crowding-Out Relationship Between Defense Expenditures and Public Education Expenditures: NATO Countries Analysis


Turkish Studies - Economics, Finance, Politics , vol.18, no.1, pp.189-205, 2023 (Peer-Reviewed Journal) identifier


In the mainstream economics and defense economics literature, the crowding-out relationship between defense expenditures and social welfare expenditures (education, health, social security, etc.) is discussed with the metaphor of “Guns and Butter”. Here, it is basically stated how much of the scarce resources should be allocated to defense services and how much to social welfare services (education, health, social security, etc.) by emphasizing the constraints of resource distribution in the economy. However, defense expenditures item that maintains its importance, although the degree varies from country to country. For this reason, defense expenditures have an important place in the public expenditures of countries. Another important expenditure item among public expenditures is education expenditures. Education expenditures constitute a locomotive power in increasing economic growth and social welfare by providing human resources and human capital stock. Therefore, it is of great importance to determine the effect of defense expenditures on social welfare expenditures. As a matter of fact, there is a significant deficiency in the literature at the point of determining the dynamic relationship between both expenditure items. In this study, it is aimed to determine the exclusion effect of defense expenditures on education expenditures by dynamic panel data analysis for 27 countries that are members of the North Atlantic Treaty Organization (NATO) based on the 2000-2019 period. As a result of the analysis, a positive relationship was found between defense expenditures and public education expenditures. In other words, no crowding-out relationship was found between defense expenditures and public education expenditures.