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Military expenditure - threats, aid, and arms races

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  • Collier, Paul
  • Hoeffler, Anke

Abstract

Using global data for the period 1960-99, the authors estimate neighborhood arms races. They find that the level of military expenditure is strongly influenced by the expenditure of neighbors. The authors estimate an"arms race multiplier,"finding that an initial exogenous increase in military expenditure by one country is more than doubled in both the originating country and its neighbor. An implication is that military expenditure is, to an extent, a"regional public bad."Potentially, there is an offsetting public good effect if rebellions are deterred by military expenditure. However, instrumenting for military expenditure, the authors find no deterrence effect of military spending on the risk of internal conflict. So there appears to be no regional public good effect offsetting the public bad arising from a neighborhood arms race.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2927.

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Date of creation: 30 Nov 2002
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Handle: RePEc:wbk:wbrwps:2927

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Keywords: Payment Systems&Infrastructure; Peace&Peacekeeping; Business Environment; Legal Products; Economic Theory&Research; Peace&Peacekeeping; Legal Products; National Governance; Social Conflict and Violence; Business Environment;

References

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  1. Malcolm Knight & Norman Loayza & Delano Villanueva, 1996. "The Peace Dividend: Military Spending Cuts and Economic Growth," IMF Staff Papers, Palgrave Macmillan, vol. 43(1), pages 1-37, March.
  2. Manski, C.F., 1991. "Identification of Endogenous Social Effects: the Reflection Problem," Working papers 9127, Wisconsin Madison - Social Systems.
  3. Smith, R P, 1980. "The Demand for Military Expenditure," Economic Journal, Royal Economic Society, vol. 90(363), pages 811-20, December.
  4. Paul Dunne & Sam Perlo-Freeman, 2003. "The Demand for Military Spending in Developing Countries," International Review of Applied Economics, Taylor & Francis Journals, vol. 17(1), pages 23-48.
  5. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
  6. Smith, Ron, 1995. "The demand for military expenditure," Handbook of Defense Economics, in: Keith Hartley & Todd Sandler (ed.), Handbook of Defense Economics, edition 1, volume 1, chapter 4, pages 69-87 Elsevier.
  7. Brito, Dagobert L. & Intriligator, Michael D., 1995. "Arms races and proliferation," Handbook of Defense Economics, in: Keith Hartley & Todd Sandler (ed.), Handbook of Defense Economics, edition 1, volume 1, chapter 6, pages 109-164 Elsevier.
  8. Feyzioglu, Tarhan & Swaroop, Vinaya & Zhu, Min, 1998. "A Panel Data Analysis of the Fungibility of Foreign Aid," World Bank Economic Review, World Bank Group, vol. 12(1), pages 29-58, January.
  9. Murshed, S Mansoob & Sen, Somnath, 1995. "Aid Conditionality and Military Expenditure Reduction in Developing Countries: Models of Asymmetric Information," Economic Journal, Royal Economic Society, vol. 105(429), pages 498-509, March.
  10. Sandler,Todd & Hartley,Keith, 1995. "The Economics of Defense," Cambridge Books, Cambridge University Press, number 9780521447287.
  11. Brzoska, Michael, 1995. "World military expenditures," Handbook of Defense Economics, in: Keith Hartley & Todd Sandler (ed.), Handbook of Defense Economics, edition 1, volume 1, chapter 3, pages 45-67 Elsevier.
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Citations

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Cited by:
  1. Indra de Soysa & Eric Neumayer, 2005. "Disarming Fears of Diversity: Ethnic Heterogeneity and State Militarization, 1988–2002," Public Economics 0503008, EconWPA, revised 01 Sep 2005.
  2. Matteo Bobba & Andrew Powell, 2007. "Aid and Growth: Politics Matters," Research Department Publications 4511, Inter-American Development Bank, Research Department.
  3. Alptekin, Aynur & Levine, Paul, 2010. "Military Expenditure and Economic Growth: A Meta-Analysis," MPRA Paper 28853, University Library of Munich, Germany.
  4. Matteo Bobba & Andrew Powell, 2007. "Ayuda y crecimiento: La política importa," Research Department Publications 4512, Inter-American Development Bank, Research Department.
  5. J Paul Dunne & Samuel Perlo-Freeman & Ron P Smith, 2007. "The Demand for Military Expenditure in Developing Countries: Hostility versus Capability," Working Papers 0707, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
  6. Gupta, Sanjeev & Clements, Benedict & Bhattacharya, Rina & Chakravarti, Shamit, 2004. "Fiscal consequences of armed conflict and terrorism in low- and middle-income countries," European Journal of Political Economy, Elsevier, vol. 20(2), pages 403-421, June.

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