Estimating the Function of Demand for Defensive Expenditures in Iran

Defensive Expenditures in Iran is a significant part of the total public expenditures due to its lack of security in the Middle East and the security threats of some countries in the world. Therefore, it is important to identify the factors affecting defense spending in Iran in terms of policy recommendations. Based on this, what is considered as the main question of this research is that what determines the defensive Expenditures (economic, social and strategic) in Iran during the years 1959-2012. To this end, a general defense expenditure model has been designed for Iran, and the autoregressive distributed lag model (ARDL) has been used to estimate it. The results of the model estimation show that, among economic variables, economic growth, non-deficits expenditures (as defense cost expenditures) and trade balance have a negative effect on Iran's defense load. Population as a social variable at a significantly lower level than other variables has had a positive effect on Iran's defense load, which indicates that defense is a general commodity. Among the strategic variables, the virtual variables of the imposed war and the possible effects of foreign invaders on the country, as expected, have had a positive impact on Iran's defense load. The average defense load of the Middle East countries has also had a positive impact on Iran's defense load, suggesting a rivalry between Iran and these countries. Also, the virtual variable separating the Islamic Republic from the Imperial system has had a negative effect on the defense load of Iran. Based on these results, it can be said that the main factors of defense spending in Iran are strategic.