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Funding and Defunding Military Spending - 200 Years of Evidence

Author

Listed:
  • Armin A. Bolouri
  • Tim Lohse
  • Salmai Qari

Abstract

We provide the first global, long-run analysis of how governments fund and de-fund military spending. Constructing a panel of 167 countries from 1817 to 2024, we estimate fiscal responses to armaments and disarmaments, including wartime shifts. Deficit spending is the primary financing policy, while larger armaments trigger deeper cuts to civilian spending. Fiscal space is a critical moderator: low-debt countries rely mainly on borrowing, whereas high-debt countries resort to taxation and budget reallocations. Armaments and disarma-ments have asymmetric effects: disarmaments only partially reverse prior poli-cies, sustaining elevated civilian spending as a fiscal peace dividend and leaving the state permanently larger.

Suggested Citation

  • Armin A. Bolouri & Tim Lohse & Salmai Qari, 2025. "Funding and Defunding Military Spending - 200 Years of Evidence," CESifo Working Paper Series 12226, CESifo.
    • Handle: RePEc:ces:ceswps:_12226
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    File URL: https://www.ifo.de/DocDL/cesifo1_wp12226.pdf
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    Keywords

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    JEL classification:

    • N4 - Economic History - - Government, War, Law, International Relations, and Regulation
    • H1 - Public Economics - - Structure and Scope of Government
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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