Economic Performance and Environmental Constraints: Evaluating Military Expenditures Through Productivity Indices in Europe

ABSTRACT This study examines the relationship between military expenditure and economic growth across 39 European countries from 2000 to 2023. Distinct from prior research that typically employs a single productivity indicator, this study utilizes both the Malmquist productivity index and the Luenberger productivity index. It incorporates an undesirable output, specifically CO 2 emissions, and employs a bootstrap approach to address the influence of outliers. The findings reveal divergent results, with the productivity measure derived from the Malmquist index surpassing that of the Luenberger index. Furthermore, this study identifies reduced efficiency because of suboptimal resource allocation, particularly when undesirable outcomes are considered. Notably, the inclusion of CO 2 emissions in the estimations indicates a detrimental effect on the technological progress of European economies, whereas military expenditures exert a positive impact within a broader framework encompassing both economic and environmental objectives. While effective strategies for sustaining military spending are essential for future gains, the results underscore the importance of aligning expenditures with sustainability goals, presenting a complex yet crucial challenge for policymakers.