Determinants of Components of Military Spending

Abstract

What drives demand for defence spending and, especially, different types of defence spending? While a large body of literature addresses the determinants of countries' defence spending, only recently have scholars begun analysing the determinants of disaggregated defence budgets, focusing on four components: equipment, personnel, infrastructure, and operating & maintenance (O&M). Using a purpose-built, unbalanced panel dataset disaggregating defence expenditures of 35 countries for between 10 and 67 years, we find that there is significant heterogeneity in the drivers of demand for defence expenditure, not just across countries and over time, but among the four categories of spending. These differences among categories have significant policy implications for the countries studied, as European countries seek to recapitalize their militaries and reconstitute stocks of munitions depleted by the Russo-Ukrainian war. Specifically, we find that equipment and O&M spending are the primary drivers of the canonical public choice hypothesis that wealthier countries spend more on defence. This has critical policy implications for Western support for Ukraine in what has become an attritional conflict, as equipment spending captures investment in major end items like vehicles and weapon systems, while O&M spending supports the acquisition and replenishment of munitions.