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Does Military Spending Stabilize or Destabilize Governments? International Analysis

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  • Rajeev K. Goel
  • Michael A. Nelson

Abstract

Military spending by nations has the potential to either stabilize governments or destabilize them (via threats of coups, for instance). We study this relationship formally by using a rich dataset on more than 150 countries, spanning nearly two recent decades from 2006 to 2023. Among other relevant factors, the analysis pays special attention to the role of corruption. The main results show that both military spending and corruption increase fragility. When three-year intervals are studied over the large time span, the positive effect of corruption remains robust, but the positive effect of military spending loses statistical significance over some periods. In other findings, greater economic prosperity promotes stability, while greater economic uncertainty has the opposite effect. Democratic nations tend to be more stable, but this is not necessarily true of presidential democracies. Furthermore, ethnic fractionalization and genetic distance promote instability, but population density has the reverse effect. Finally, considering the endogeneity of corruption via IV regressions supports the main findings, and the mediation analysis shows little mediation. Policy implications are discussed.

Suggested Citation

  • Rajeev K. Goel & Michael A. Nelson, 2026. "Does Military Spending Stabilize or Destabilize Governments? International Analysis," CESifo Working Paper Series 12707, CESifo.
    • Handle: RePEc:ces:ceswps:_12707
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    References listed on IDEAS

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    1. Derick W. Brinkerhoff, 2011. "State Fragility and Governance: Conflict Mitigation and Subnational Perspectives," Development Policy Review, Overseas Development Institute, vol. 29(2), pages 131-153, March.
    2. Salvatore Capasso & Rajeev K. Goel & James W. Saunoris, 2019. "Is it the gums, teeth or the bite? Effectiveness of dimensions of enforcement in curbing corruption," Economics of Governance, Springer, vol. 20(4), pages 329-369, December.
    3. Duygu Yolcu Karadam & Nadir Öcal & Jülide Yildirim, 2023. "Distinct Asymmetric Effects of Military Spending on Economic Growth for Different Income Groups of Countries," Defence and Peace Economics, Taylor & Francis Journals, vol. 34(4), pages 477-494, May.
    4. Gupta, Sanjeev & de Mello, Luiz & Sharan, Raju, 2001. "Corruption and military spending," European Journal of Political Economy, Elsevier, vol. 17(4), pages 749-777, November.
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    Keywords

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    JEL classification:

    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • F50 - International Economics - - International Relations, National Security, and International Political Economy - - - General
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions

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