Linking National Security to Economic Growth: An International Political Economy Approach

Abstract

This paper focuses on developing a utility—maximizing model, which points to an optimal defense budget allocation as well as a relationship between security and growth. We test the validity of our model empirically in the case of Greece and Turkey for the period 1971–2023, considering a set of geopolitical, institutional, and economic variables. Our results indicate that if the level of security attained is inadequate in terms of the threat faced, the economic environment becomes highly uncertain, thus depriving the economy from increasing its GDP. In addition, we point to the need for investment in domestic defense technology and infrastructure, both for facing threats and for promoting economic growth. At the institutional level our results indicate the crucial role of the regime type in smoothing the relationship between the two adversaries. The policy implications derived are based on the close relationship between national security, economic growth, and institutions, indicating the need for economies to invest in their domestic industrial base, in light of the latest technological progress and the multipolar nature of the international system.