Should Education and Military Expenditures be Combined for Government Economic Policy?

Cespic Working Paper 2022/01 (Anna Balestra, Raul Caruso)

This paper examines the impact of EDUMILEX, namely the ratio between investment in education and military expenditure on economic performance, i.e. GDP per capita and labor productivity, using a panel data estimation for 60 countries over the period 2000-2018. The findings highlight a non-linear relationship. In particular, results suggest that a cubic relationship exists between EDUMILEX and economic performance. The value of EDUMILEX computed at the critical value can be considered the target variable for economic policy. Heterogeneity between developed and non-developed has been also investigated. Findings confirm that the effect of EDUMILEX is heterogeneous. Lower values of EDUMILEX are required to increase of economic performance in developed countries compared to non-developed ones.

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