The Demand for Military Expenditure Flashcards
Main reasons why countries build weapons:
1 Arms races:
= time-series patterns of military expenditures in terms of ACTIONS-REACTIONS behavior between two or more rivals who do not trust each other and disagree about the distribution of power between themselves.
- Organization and bureaucratic politics
the main determinant of this year’s budget is last year’s budget.
- Organization and bureaucratic politics
Emphasized “instrumentalism” and bargaining over the defense budget, starting from the status quo.
the main determinant of this year’s budget is last year’s budget.
you might have more expenditure this year although the threat didn’t change because they keep the same budget + inflation. of they had to buy new suff.
1 Arms races:
= time-series patterns of military expenditures in terms of actions-reaction behavior between two or mora rivals who do not trust each other and disagree about the distribution of power between themselves.
defense spending is determined by the:
- ME of rival (“reaction / defense” coefficient) Threat
- Economic burden of armament (fatigue coefficient) (the economic of the country will condition the amount of money you spend on defense. this amount can be amplified or contained by the economy of the country.
- Perceptions of leaders which are exogenous to the level of arms (grievance coefficient) Leader’s goal. Regan wanted the US to be the most powerful country.
–> more suitable for enduring rivalries of countries in conflict (Pakistan-India, Greece-Turkey..)
what influence arms increases
income
type of government
strategic factors,
security /threat perceptions (internal and external)
The demand for military expenditure
Considering the rational actor model: neoclassical model: a national state that maximized welfare as a function of
W= W (S, C, N, ZW)
W = W (security, economic variables, population, other exogenous political influences)
budget constraint
Y = PcC + PmM
Y: nominal Aggregate income
all these things are important, but you BUDGET IS LIMITED. this will condition the happiness you get.
security function
S = S (M, M1, .. Mn, ZS)
M: military forces of the country
M1… Mn: military forces of other countries
ZS: other strategic variables
if you have a lot of alliances you won’t have to spend so much.
Even if there aren’t any unknown threat there might be some unknown threats.
Demand for military expenditures
M = M (pm/pc, Y, N, M1, …. Mn, ZW, ZS
ZW: other exogenous political influences
ZS: other strategic variables
Econometric estimation of the demand for military expenditures
ME = f (income, spilling, threat, economic variables, political variables, dummies)
Income: GDP
Spillins: the lagged military expenditure of all its allies
Threat: the (lagged) military expenditure of its adversaries
Economic variables: the size of the budget deficit (if you have deficit you can’t spend a lot)
Political variables: the ruling government’s party affiliation
Dummies: capture other environmental factors such as the presence of a war or a change in strategic doctrine
The Demand for military expenditure in third world counties
Log Military Burden = Lagged MB, Income + (last year spending) Population +/- External war + Civil war + Security web military expenditure + Potential enemies military expenditure + Enemies military expenditure + Unknown threat + Democracy-Autocracy - China, USSR, US Dummy + ME dummy + Great power enemy dummy +
Theoretical expectation
Income (GNP)
+
Given the public good nature of defense –>
higher income is likely to lead to higher spending
Theoretical expectation
Population
Negative if large population can provide some intrinsic security (large armies) either by reducing the need for high military expenditure or hi-thechonogy equipment.
Positive if defense is a “pure public good” and consequently larger population should lead to higher military spending
BUT: Defense spending is a public good. it is not rival and not exludable The consumption of one cannot reduce or exclude the consumption of another.
If national defense is a public good –> the bigger the population the more you spend. This is the case for health or education, but not for defense.
it should be negative -_> your protect your TERRITORY and BORDERS. It doesn’t change with population –> defense is a special public good.
Theoretical expectation
Civil war
External war
A country at civil / interstate war needs to replace stock of arms and ammunition used up in the fighting
Theoretical expectation
Strategic consideration: security web
Determinant of external threat
total military spending of all countries in the security web +
all countries capable of significantly affecting a country’s security. neighboring countries and regional powers capable of projecting their influence beyond their immediate land and sea borders
Theoretical expectation
strategic consideration: enemies
Determinant of external threat
total military spending on enemies +
the tow countries must either currently be currently engaged in some form of armed conflict of must have gone to war in the past, with the grievance still unresolved.
Theoretical expectation
strategic consideration: potential enemies
Determinant of external threat
total military spending of potential economies +
the two countries be must involved in a dispute with either a history of, or clear potential for. militarized confrontation.
Theoretical expectation
democracy-autocratic-distatoship-totalitarian
democratic counties spend lees on military than non-democracies
Autocratic states are more likely to rely on the military to RETAIN their power
Dictatorship are more likely to rely on a culture and ideology of militarism to JUSTIFY their power
Totalitarian states are also more likely to be able to maintain unjustifiable and inefficient levels of spending by the military and other governmental department in pursuance of the INTEREST OF THE PUBLIC ELITE rather than the country as a whole
Theoretical expectation
Great power enemy dummy
+ picks up a relation to enmity with a superpower
Theoretical expectation
USA / CHINA / USSR dummy
+ capture proximity to USA / CHINA / USSR
ME country dummy
+ capture bad neighborhood or contagion effects
what make countries powerful
size
population
economic might
military might
Military spending Developing countries
Cold war era
Income insignificant
population significant negative impact
- large population offer some security itself
small countries spend more on hi-thecnology weaponry rather than large army or
- large population place grater extra demand on civil consumption needs than on security needs
Strategic variables:
military expenditure in the security web affect MB but potential enemies have even more effect.
External war is statistically significant
ME dummy is very important –> high contagion effect
Military spending Developing countries
Post Cold war era
External war become complexity insignificant
Civil war dummy is also insignificant (*) significant coefficient
Security web, CHINA, MEAST are much lower (stil very significant)
external war is insignificant
Military spending Developing countries
Cold war vs Post Cold War
Very little evidence that the relationship between different classes of threat and military spending change between the two periods
Things that influence defense spending in a country are the same all the time.
what more influence if you are a democracy.
income is not important!
What most influence military spending in developing countries
if you are a democracy Population - Potential enemies CHINA and ME security web
NO influence
Income!!!
Military expenditure in developed countries: EU 15
proportion of GDP
very heterogeneous.
from 1% of Luxembourg to more than 5% of Greece
very little uniformity in the factors that determine each European country’s demand for ME
–> when people talk about the development of the Common European Security and defense policy should keep this in mind!
it won’t happen! country would have to give up external sovereignty
Demand for military expenditure in developed countries: EU 15
Military expenditure
Income (GDP) + Population - Non.military gov. spending - Trade (+/-) NATO (+/-) US +/- lagged dependent + Country-specific dummies and variables +/- (Greece Spain, Portugal, UK)
Non - military government spending
represent the economic burden of defense and is expected to have a negative sign to account for the opportunity costs of defense.
Health, education, road infrastructure eat. if you spend more in education, then you have less money left. Trade-off
Trade influence on military spending
(-) if trade has a pacify effect
trade is a resources of income and wealth for many countries, trade has a pacifying effect, the more a country trade the wealthier it gets, the less incline to fight.
+ if gain from trade can be converted to military might.
China is using trade to finance military power.
Countries related dummies: Greece
the perceived threat after the Turkish invasion in Cyprus in 1974
turkey military expenditure is included to see whether Greece’s military expenditure deputy on the enemy’s military spending
Countries related dummies: Portugal
a dummy to capture the increase military burden prior the collapse of the dictatorship and the end of the colonial wars
Countries related dummies: Spain
a dummy to account for the increase in military expenditure due to the war over the Malvinas in 1982,
the export-led growth of the Spanish defense industry since the early 1980s and membership of the NATO alliance.
Countries related dummies: UK
a dummy for the year 1981 captures the strategic change in NATO that affected the country’s military spending - the main supporter of the US
Result: developed countries EU 15
Income has mostly a significant positive effect on military spending
Population: mostly negative effect
Non-military gov. spending (crowding-out) apples for 5 EU counties –> in these countries increase in other non-defense gov expenditure lead to cuts in defense spending or the contrary.
Most member are follower of NATO
PT, NED, GRE follower of US. GER, LUX, free riders
Country related dummies are all significant. For grace significant positive sign!
Regime type and the provision of the public good
Democracy vs. non democracy in the provision of public goods
supply side and demand side:
positive effect of democracy on public good because of the:
supply side:
-median voter
-Institutional arrangements regarding the selection of leaders
demand side:
-civil liberties: freedom of speech, press, and association is likely to make the public in democratic countries more aware of security concerns. in autocracies you can’t protest, you don’t have freedom of speech of anything.
The median voter
non democratic regimes are likely to under-provide public good because there are typically ruled by small elites that use the resources of their respective country to create personal wealth.
Democracies are likely to provide more public good because the means voter, who decided on public policy faces lower costs from governmental policies relative to the economic and political elite
-Institutional arrangements regarding the selection of leaders
- the selectorate: groups of people who can affect the choice of leader and be the recipients of the benefits distributed by leaders
- and the winning coalition: the subgroup of the electorate maintaining incumbents in office in exchange for special privileged
determine whether governmental policies provide public or private goods
--> in autocraties (winning coalition small and electorate large) leader have to provide the small number of their essential supporters with a relatively
Autocratic institutional structure promote loyalty to the incumbent leader among the privileged few of the winning coalition which further enhances the provision of private good.
Autocracies: the amount of people that decide are relatively small. Elites are not willing to give much. Autocracies for proving public good should get money from the elites but they won’t support in this case.
Democracies: winning coalition is large relative to the selectorate, leader lack sufficient resources to reward their supporter with high levels of private goods.
the weak loyalty norm encourage defection from the incumbent leads’ winning coalition to opposing candidates this its forces leaders to adopt policies the provide relatively high level of public goods, such as security) to ensure their political survival. Rule by the people. the cost per person is smaller because everyone pays
democratic leader are likely to experience greater incentive (to survive in office) than autocratic outer parts to satisfy public demand for public goods. in democracy you can’t bribe. the best way to be reelected is to provide public goods.
–> democracies should provide more public good because the costs of median voter is low and leader have the incentive
Defense is a pure public good: what does it mean?
one security concerns are met, democracies do not have any incentives to spend more
democracies have to satisfy the other needs of the electorate such as education, health ..
–> even in democracies spend more on public good, defense spending should be lower in a democratic political system than in a non-democratic one.
Type of democratic government and defense spending (public good provision)
Parliamentary system in the provision of public good
Parliamentary systems: the legislative cohesion leads to policies aiming at pleasing the majority of voters and consequently increase spending on public goods
Type of democratic government and defense spending (public good provision)
Presidential system in the provision of public good
presidential systems: unstable legislative coalisions and the struggle among different minorities over different issues on the legislative agenda lead to inefficiently low spending on public goods. This also promote the allocation of spending to powerful minorities.
One person is govern a lot of power, much more than in a parliamentarian system. Leaders elected by the people usually 50% +1.
Presidential democracies are characterized by a lack of flexibility and the dual legitimacy that arises for the independent election of both president and parliament.
in case of institutional conflict between president and parliament, the military can act as a leveraging power. –
–> presidential system can result in higher spending.
the military might use its power and influence in a presidential system to control the state, thus securing for itself higher rents and greater investment.
Presidential spend more because of the clash between president and parliament.
Electoral rules and public good provision
Proportional representation system
(the % of voles received by each party matches the proportion of seats it hold in parliament)
lead the composition of public spending toward programs benefiting large groups in the population. proportional system allow representation of a greater variety of interests
spend more in the provision of public goods
the more parties you have in the parliament the more public good you provide
Majoritarian voting system
a winner takes all system
lead the composition of public spending towards program benefiting swing (voters) groups in the population.
majoritarian systems are more grounded in local entered
spend more in defense.
