The Effects of the Security Environment on Military Expenditures: Pooled Analyses of 165 Countries, 1950-2000
AbstractCountries' military expenditures differ greatly across both space and time. This study examines the determinants of military spending, with particular reference to the importance of the external security environment. Using the liberal-realist model of international relations, we first estimate the probability that two countries will be involved in a fatal militarized interstate dispute. We then aggregate these ex ante estimates of the likelihood of dyadic conflict, calculating the annual joint probability that a country will be involved in a fatal dispute. This is our measure of the external threat. We then estimate the level of military spending by country and year as a function of the security environment, arms races with foes and the defense expenditures of friendly countries, states' involvement in actual military conflict, economic output, and various other political variables. In analyses of a panel of 165 countries, 1950 to 2000, we find that the security environment is a powerful determinant of military spending. Indeed, our prospectively measured estimate of the external threat is more influential than any of several influences known only ex post. Our best estimate is that a one percentage point rise in the probability of a fatal dispute leads to a 3 percent increase in military spending.
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Bibliographic InfoPaper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1707.
Length: 34 pages
Date of creation: Jun 2009
Date of revision: Oct 2009
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Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA
Find related papers by JEL classification:
- H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
- H5 - Public Economics - - National Government Expenditures and Related Policies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-07-03 (All new papers)
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