Estimating the Crowding-Out Effect of Defense Expenditures on Public Health Expenditures in Countries with Different Income Groups
Subject Areas : -Health economySahebe Mohammadian Mansour 1 , abolghasem golkhandan 2
1 - Assistant Professor, Department of Economics, Payam Noor University, Tehran, Iran
2 - Ph.D Student of Economics, Lorestan University, Lorestan, Iran
Keywords: Defense Expenditures, Generalized Method of Moment, Crowding-Out Effect, Per Capita Income, Public Health Expenditures,
Abstract :
Introduction: An increase in the share of defense expenditures from the total public expenditures may have a negative effect on the share of public health expenditures from the total public expenditures due to the concept of opportunity cost and through the crowding-out effect. The intensity of this effect can change according to the income level. Based on this, the main purpose of this study is to estimate the crowding-out effect of defense expenditures on public health expenditures in countries with different income groups.Methods: The present descriptive-analytical and applied study using the panel data of 90 countries of the world (including Iran) during the period of 2000-2018, to estimate the crowding-out effect of defense expenditures on public health expenditures by separating the studied countries into three income groups including low and below average income, above average income countries and high income countries, and also to examine the cross-sectional effect of defense expenditures and per capita income on public health expenditures in all sample countries. The data used were also collected from the World Health Organization database, World Development Indicators belonging to the World Bank and SIPRI. Also, the models were estimated in the form of dynamic panel data using stationery and panel cointegration analyzes and Generalized Method of Moment (GMM) in Eviews10.0 software.Results: The results show that the crowding-out effect of defense expenditures on public health expenditures in terms of elasticity and for countries with low and below average income, countries with above average income and countries with high income are equivalent to -0.654, -0.453 and -0.316 respectively. The cross-sectional effect of defense expenditures and per capita income on public health expenditures of all the studied countries is also positive and equal to 0.112.Conclusion: The (negative) crowding-out effect of defense expenditures on public health expenditures is confirmed for all countries with different income groups; But with the increase in per capita income, this crowding-out effect decreases exponentially. Based on this, it is necessary to adopt the necessary policies to ensure security without spending high defense expenditures, especially in countries with low per capita income, in order to prevent the reduction of public health expenses.
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20- Abdolah Milani M, Mohammadi T, Tavassoli S. The Determinants of health expenditures with an emphasis on population ageing: A country-level panel data analysis. Economics Research, 2017; 17(65): 25-50. [Persian]
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_||_1- Lin ES, Ali HE, Lu Y-L. Does military spending crowd out social welfare expenditures? Evidence from a panel of OECD countries. Defence and Peace Economy, 2015; 26(1): 33-48.
2- Golkhandan A. Effect of military expenditure on health status in developing countries. Hrjbaq, 2019; 4(1): 47-54. [Persian]
3- Zhang Y, Liu X, Xu J, Wang R. Does military spending promote social welfare? A comparative analysis of the BRICS and G7 countries. Defence and Peace Economy, 2017; 28(6): 686-702.
4- Lkegam M, Wang Z. Does military expenditure crowd out health-care spending? Cross-country empirics. Quality & Quantity, 2022. DOI:10.1007/s11135-022-01412-x
5- Carter J, Ondercin HL, Palmer G. Guns, butter, and growth: The consequences of military spending reconsidered. Political Research Quarterly, 2021; 74(1): 148-165.
6- Gillani S, Shafiq MN, Ahmad TI. military expenditures and health outcomes: A global perspective. iRASD Journal of Economics, International Research Association for Sustainable Development (iRASD), 2019; 1(1): 1-20.
7- Fan H, Liu W, Coyte PC. Do military expenditures crowd-out health expenditures? Evidence from around the world, 2000–2013. Defence and Peace Economy, 2018; 29(7): 766-779.
8- Kollias C, Paleologou SM. Budgetary trade-offs between defense, education and social spending in Greece. Applied Economics Letters, 2011; 18(11): 1071-1075.
9- Yildirim J, Sezgin S. Defence, education and health expenditures in Turkey 1924–96. Journal of Peace Research, 2002; 39(5): 569-580.
10- Ali HE. Military expenditures and human development: Guns and butter arguments revisited: A case study from Egypt. Peace Economics, Peace Science and Public Policy, 2011; 17(1): 1-19.
11- Coutts A, Daoud A, Fakih A, Marrouch W, Reinsberg B.: Guns and butter? military expenditure and health spending on the eve of the Arab Spring. Def. Peace Econ, 2019; 30: 227-237.
12- Biscione A. Caruso R. Military expenditures and income inequality: evidence from a panel of transition countries (1990–2015). Def. Peace Econ, 2021; 32: 46-67.
13- Hirnissa M, Habibullah MS, Baharom A. The relationship between defense, education and health expenditures in selected Asian countries. Interl J Economy & Finance, 2015;1(2):149-55.
14- Baltagi B. Econometric analysis of panel data: John Wiley & Sons Ltd 2005.
15- Im KS, Pesaran MH, Shin Y. Testing for unit roots in heterogeneous panels. Econometrics, 2003; 115(1): 53-74.
16- Nofersti M. Unit Roots and Cointegration in Econometric: Resa Publications 1999. [Persian]
17- Kao C. Spurious regression and residual-based tests for cointegration in panel data. J econometrics, 1999; 90(1):1-44.
18- Arellano M, Bond S. Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. The review of economy study, 1991; 58(2): 277-297.
19- Green WH. Econometric analysis. 7th ed. New Jersey: Upper Saddle River: Pearson International 2012.
20- Abdolah Milani M, Mohammadi T, Tavassoli S. The Determinants of health expenditures with an emphasis on population ageing: A country-level panel data analysis. Economics Research, 2017; 17(65): 25-50. [Persian]
21- Shojaei F, Mohseni Zonouzi SJ, Mohammad Zadeh Y. The effects of population ageing on health care expenditure in Iran. Social Security Journal, 2019; 15(1): 127-139. [Persian]
22- Alizadeh M, Golkhandan A. Robust determinants of health sector costs in Iran: Bayesian model averaging approach. Journal of healthcare management, 2016; 7(2): 47-61.