A Dynamic Panel Analysis Using SIPRI's Extended Military Expenditure Data: The Case of Middle Power Nations
THE ECONOMICS OF PEACE AND SECURITY JOURNAL Vol. 11, No. 2 (2016) doi:10.15355/epsj.11.2.x
Posted: 16 Sep 2016
Date Written: October 1, 2016
Abstract
This study employs SIPRI’s extended military expenditure dataset to estimate a dynamic panel analysis of Middle Powers’ defense posture. The dynamic approach, particularly the Auto Regressive Distributed Lag (ARDL) approach, permits simultaneous, but separate, assessment of short- and long-run effects of a particular variable on military expenditure. We verify the robustness of earlier findings on Middle Power nations’ defense posture. In particular, their military expenditure tends to an income elasticity of greater than one, indicating that military power is, at least in part, a status good. In addition, Middle Powers react to threat variables that proxy global instability, such as nuclear power proliferation, and they use foreign aid as a complementary policy tool. A strong middle class and median voter choices lead to significant trade-offs between military and nonmilitary government spending.
Keywords: Threat, Nuclear arsenal, military expenditure, Middle Power nations, ARDL Panel Data approach
JEL Classification: H56, C23
Suggested Citation: Suggested Citation