Military Spending and War

We revisit the theory of critical deterrence—the idea that military spending may reduce the risk of conflict by increasing its expected costs. To test this theory, we assemble a new cross-national dataset combining information on armed conflicts and defense spending over a 75-year period. We find that increases in military spending have no effect on short-run conflict risk—contrary to concerns that buildups may provoke escalation—but that they do lead to a small and persistent decline in conflict over the long run. Although the effect of spending on conflict is modest, its effect on the cost of war is large: higher military spending raises the scale of battlefield casualties. The effect of military spending on conflict is more pronounced for democracies, which are less likely to use force offensively, and is concentrated in internal conflicts involving nonstate actors. The deterrent power of military spending is strongest in ethnically polarized societies—precisely where the threat of civil war is most acute. Last, using dyadic data, we find that higher military spending causes a decrease in bilateral interstate conflict, and that this effect may be larger than the one we document for intrastate conflict using panel data. Taken together, our results point to a low pass-through from the cost of war to its incidence: even sharp increases in military spending yield only modest gains in deterrence.