Examining the Impacts of Military Expenditures on Economic Productivity: A System Dynamics Approach

Abstract

The relationship between military expenditures and economic productivity has taken the attention of many researchers and there exist an important number of studies approaching the topic through several techniques. However, there is no consensus among the scholars whether military expenditures trigger economic growth, productivity, and other macroeconomic indicators. Such arguments are mainly due to unclear results obtained from the existing studies, in which the complex relationships between military expenditures and macroeconomics are not fully incorporated. Considering the bidirectional and nonlinear relationships among macroeconomic indicators and complex feedback mechanisms, a system dynamics (SD) model for examining the impacts of military expenditures on economic productivity in Turkey is proposed. The proposed SD model aims to reflect the complex environment surrounding the military spending–economic productivity nexus and to analyze the feedback structures that lead to miscellaneous consequences with delays. A stock–flow model is developed to represent the complex nonlinear relationships and causalities between the variables. Data from SIPRI, the World Bank, and several local statistical sources covering the years 2009–2018 are utilized to simulate the existing case, warfare in neighbors, economic shrinkage scenarios, and the combination of the latter two. The results obtained from the scenarios suggest that short fixes such as importing military products instead of national investments give rise to chronic issues like continual dependence on foreign supply, hence, leading to decrease in overall economic growth. To the best of our knowledge, this is the first attempt to integrate SD methodology with military expenditure and economic productivity analysis.