Defense or health? budgetary trade-offs in government spending, incrementalism, and government debt

This paper analyzes the relationship between defense expenditure and public health expenditure. In addition, we consider the effect of the incrementalism theory of budget and total amount of government debt. Prior controversial research results were reviewed based on the theory of growth-stimulating effects and crowding out effects. Panel fixed effects model and simultaneous equation models (SEMs) were applied to perform a comparative analysis based on the panel data. The analysis results showed crowding out effects in all models. In addition, the positive effect of last year’s budget on defense and public health expenditures in accordance with the budget’s incrementalism was also confirmed. Government debt negatively influenced defense and public health expenditures. Analysis results that distinguished between high- and low-growth domestic product (GDP) countries were also presented to confirm the stability of results.