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Determining Military Expenditures: Arms Races and Spill-Over Effects in Cross-Section and Panel Data

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Author Info

  • J Paul Dunne

    ()
    (British University in Egypt, Cairo and University of the West of England, Bristol)

  • Sam Perlo-Freeman

    ()
    (Stockholm International Peace Research Institute (SIPRI))

  • Ron P Smith

    ()
    (Birkbeck College, London)

Abstract

This paper considers the determinants of military spending, building on an emerging literature that estimates military expenditure demand functions in cross-section and panel data, incorporating ‘arms-race’ type effects. It updates Dunne and Perlo-Freeman (2003b) using the SIPRI military expenditure database for the period 1988-2003, finding broadly similar results. It also shows differences in results across panel methods, particularly the within and between estimates and illustrates the importance of recognising and modelling dynamic processes within panel data. Heterogeneity is also found to be an important issue and when countries are broken up into groups on the basis of per capita income there is no obvious systematic pattern in the results. This is seen to imply that the demand for military spending, even between two mutually hostile powers, may depend on the whole nature of the relationship between them (and other countries and events in the region), and not simply Richardsonian action-reaction patterns.

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File URL: http://carecon.org.uk/BUEDP/0801.pdf
File Function: First version, 2008
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Bibliographic Info

Paper provided by British University in Egypt, Faulty of Business Administration, Economics and Political Science in its series Discussion Papers with number 0801.

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Length: 24 pages
Date of creation: Oct 2008
Date of revision:
Handle: RePEc:bue:wpaper:0801

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Postal: Cairo - Suez Desert Road - El Sherouk City
Web page: http://www.bue.edu.eg/
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Keywords: Military Spending; Demand; Arms races; Spillovers; Panel data;

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References

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  1. Dunne, J. Paul & Smith, Ron P., 2007. "The Econometrics of Military Arms Races," Handbook of Defense Economics, Elsevier, Elsevier.
  2. Aamer S. Abu-Qarn & J Paul Dunne & Yasmine M. Abdelfattah & Shadwa Zaher, 2010. "The Demand for Military Spending in Egypt," Working Papers 1001, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
  3. Paul Dunne & Sam Perlo-Freeman, 2003. "The Demand for Military Spending in Developing Countries," International Review of Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 17(1), pages 23-48.
  4. Paul Collier & Anke Hoeffler, 2007. "Unintended Consequences: Does Aid Promote Arms Races?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 69(1), pages 1-27, 02.
  5. J. Paul Dunne & Sam Perlo-Freeman, 2003. "The demand for military spending in developing countries: A dynamic panel analysis," Defence and Peace Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 14(6), pages 461-474.
  6. Solomon Polachek & Carlos Seiglie & Jun Xiang, 2005. "Globalization and International Conflict: Can FDI Increase Peace?," Working Papers Rutgers University, Newark, Department of Economics, Rutgers University, Newark 2005-004, Department of Economics, Rutgers University, Newark.
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Cited by:
  1. Unal Tongur & Sara Hsu & Adem Yavuz Elveren, 2013. "Military Expenditures and Political Regimes: An Analysis Using Global Data, 1963-2001," ERC Working Papers, ERC - Economic Research Center, Middle East Technical University 1307, ERC - Economic Research Center, Middle East Technical University, revised Jul 2013.
  2. Rota, Mauro, 2011. "Military Burden and the Democracy Puzzle," MPRA Paper 35254, University Library of Munich, Germany.
  3. Vincenzo Bove & Jennifer Brauner, 2011. "The Demand for Military Expenditure in Authoritarian Regimes," Birkbeck Working Papers in Economics and Finance, Birkbeck, Department of Economics, Mathematics & Statistics 1106, Birkbeck, Department of Economics, Mathematics & Statistics.
  4. Bove, Vincenzo & Efthyvoulou, Georgios, 2013. "Political Cycles in Public Expenditure: Butter vs Guns," NEPS Working Papers, Network of European Peace Scientists 7/2013, Network of European Peace Scientists.

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