The Effect of Military Budget Expenditure Share on Economic Growth in Iran

The article is aimed at investigating the effect of the military budget expenditure share in GDP on the Iranian economic growth in the endogenous growth model framework. To meet this end, using the time-series data of Iran during 1988 to 2012 and the Auto-Regressive Distribution Lag Model, the effect of military budget expenditure share in GDP on economic growth has been studied. The results show an inverted U-shape relationship between economic growth and military budget expenditure share in GDP. Therefore, there is a proportion for military budget expenditure which maximizes the economic growth, which is 2.73 percent from GDP which is lower than (2.95 percent) the average proportion in the considered time period. As a result, it seems that the society can benefit from reallocating the resources to non-military budget expenditures such as education and health.