Asia-Pacific Demand for Military Expenditure: Spatial Panel and SUR Estimates

Figures & data

Figure 1. Total military expenditure by region, 1991–2015.

Notes: Asia-Pacific includes World Bank classification of South Asia, East Asia, and Pacific, and Africa includes both sub-Saharan Africa and North Africa.

Figure 2. Major Asia-Pacific countries’ regional shares of military expenditure, 1991–2015.

Notes: U.S. allies include Australia, Japan, New Zealand, Pakistan, Philippines and South Korea. Others include Bangladesh, Cambodia, Indonesia, Malaysia, Laos, Nepal, Russia, Singapore, Sri Lanka, Thailand, and Vietnam.

Table 1. ME/GDP values for sample countries at four snapshots.

	ME/GDP	ME/GDP	ME/GDP	ME/GDP
	1991	2000	2010	2015
Australia	2.17	1.83	1.86	1.97
Bangladesh	1.21	1.57	1.32	1.36
Cambodia	2.33	2.21	1.49	2.11
China	2.35	1.90	1.93	1.94
India	3.00	3.05	2.71	2.42
Indonesia	1.32	0.68	0.62	0.89
Japan	0.94	0.96	0.99	0.99
Laos		0.79	0.23
Malaysia	3.20	1.63	1.51	1.53
Nepal	0.98	0.89	1.46	1.47
New Zealand	2.26	1.58	1.32	1.12
Pakistan	6.57	3.97	3.07	3.43
Philippines	2.01	1.61	1.22	1.14
Russia		3.55	3.82	4.90
Singapore	4.45	4.52	3.43	3.19
South Korea	3.71	2.46	2.57	2.64
Sri Lanka	3.08	5.03	2.70	2.50
Thailand	2.65	1.53	1.56	1.45
United States	4.57	2.93	4.67	3.30
Vietnam	5.60		2.31	2.36

Notes: The figures are expressed in terms of percentages. Data source: SIPRI (2017).

Figure 3. A map of sample countries.

Notes: The sample countries include Australia, Bangladesh, Cambodia, China, India, Indonesia, Japan, Laos, Malaysia, Nepal, New Zealand, Pakistan, Philippines, Russia, Singapore, South Korea, Sri Lanka, Thailand, and Vietnam.

Table 2. China, U.S. allies and non-U.S. allies demand for ME, 1991–2015.

	(1)	(2)	(3)
	China	U.S. allies	Non-U.S. allies
Log (Chinese ME)		–0.0517***	–0.335
		(–2.67)	(–1.31)
Log (U . S . allies ME)	1.547		3.569***
	(1.43)		(2.75)
Log (Non-U . S . allies ME)	0.166*	–0.00155
	(1.78)	(–0.19)
Log (GDP)	1.121***	0.608***	–0.0290
	(3.84)	(5.69)	(–0.06)
Trade Openness	–2.203	0.289**	0.413*
	(–1.25)	(2.15)	(1.89)
Log (POP)		0.125	–0.828
		(0.52)	(–1.37)
Constant	–45.96*	5.101***	–35.22
	(–1.94)	(2.96)	(–1.48)
Country Fixed Effects	NO	YES	YES
N	24	149	275
R^2	0.98	0.99	0.96

Notes: Significance levels: * p < 0.10, **p < 0.05 and ***p < 0.01. t-statistics in parentheses. Trade Openness is defined as (imports + exports)/GDP. US allies include Australia, Japan, New Zealand, Pakistan, Philippines, and South Korea. Non-US allies include Bangladesh, Cambodia, India, Indonesia, Laos, Malaysia, Nepal, Russia, Singapore, Sri Lanka, Thailand, and Vietnam.

Table 3. U.S. allies and non-U.S. allies demand for ME, 1991–2001 and 2002–2015.

	(1)	(2)	(3)	(4)
Variable	U.S. allies		Non-U.S. allies
	(1991–2001)	(2002–2015)	(1991–2001)	(2002–2015)
Log (Chinese ME)	–0.0314	–0.0756**	–0.714***	0.538***
	(–1.02)	(–2.44)	(–2.93)	(2.94)
Log (U . S . allies ME)			1.026	0.591
			(0.55)	(0.83)
Log (Non-U . S . allies ME)	0.00398	–0.0161***
	(0.83)	(–3.03)
Log (GDP)	0.213*	0.540***	1.065*	0.0944
	(1.74)	(4.58)	(1.69)	(0.36)
Trade Openness	0.640***	0.637***	–0.00452	0.358***
	(4.55)	(5.28)	(–0.01)	(2.73)
Log (POP)	–0.146	0.826**	–0.336	–2.389***
	(–0.73)	(2.53)	(–0.21)	(–6.60)
Country Fixed Effects	YES	YES	YES	YES
N	66	83	111	164
R^2	0.99	0.99	0.97	0.99

Notes: Significance levels: *p < 0.10, **p < 0.05 and ***p < 0.01. t-statistics in parentheses. Trade Openness is defined as (imports + exports)/GDP. US allies include Australia, Japan, New Zealand, Pakistan, Philippines, and South Korea. Non-US allies include Bangladesh, Cambodia, India, Indonesia, Laos, Malaysia, Nepal, Russia, Singapore, Sri Lanka, Thailand, and Vietnam.

Table 4. Asia-Pacific military expenditure, 1991–2015.

	(1)	(2)	(3)	(4)	(5)
Variable	ME	ME	ME	ME	ME
Spillovers	–0.102**
	(–2.57)
Spatial Lag (contiguity)		–0.249***
		(–2.98)
Spatial Lag (inverse distance)			–24.84**
			(–2.53)
Spatial Lag (contiguity + U . S . )				–0.255***
				(–2.69)
Spatial Lag (contiguity + China)					–0.263***
					(–3.14)
Log (GDP)	0.983***	1.275***	1.082***	1.237***	1.281***
	(9.29)	(8.98)	(10.87)	(8.92)	(9.02)
Trade Openness	0.118	–0.0387	0.111	–0.00678	–0.0431
	(1.14)	(–0.32)	(0.88)	(–0.06)	(–0.36)
Log (POP)	–1.227***	–1.056***	–1.113***	–1.157***	–0.936***
	(–4.33)	(–3.12)	(–3.64)	(–3.55)	(–2.76)
Constant	16.99***	11.65***	11.73***	14.16***	9.364***
	(4.64)	(3.24)	(3.46)	(4.22)	(2.95)
Country Fixed Effects	YES	YES	YES	YES	YES
N	448	424	448	448	448
R^2	0.98	0.98	0.99	0.98	0.98

Notes: Significance levels: *p < 0.10, **p < 0.05 and ***p < 0.01. t-statistics in parentheses. Trade Openness is defined as (imports + exports)/GDP. Asia-Pacific countries include Australia, Bangladesh, Cambodia, China, India, Indonesia, Japan, Laos, Malaysia, Nepal, New Zealand, Pakistan, Philippines, Russia, Singapore, South Korea, Sri Lanka, Thailand, and Vietnam.

Table 5. Asia-Pacific military expenditure, expanded contiguity runs, 1991–2015.

	(1)	(2)	(3)	(4)	(5)	(6)
Variable	ME	ME	ME	ME	ME	ME
Spatial Lag (contiguity2000)	–0.135*
	(–1.76)
Spatial Lag (contiguity2000 + China)		–0.0834
		(–1.58)
Spatial Lag (contiguity2000 + U . S . )			–0.271*
			(–1.80)
Spatial Lag (contiguity4000)				–0.0718**
				(–2.17)
Spatial Lag (contiguity4000 + China)					–0.0624**
					(–2.03)
Spatial Lag (contiguity4000 + U . S . )						–0.0862**
						(–2.32)
Log (GDP)	0.981***	1.061***	1.086***	0.927***	0.936***	0.924***
	(6.27)	(8.51)	(8.33)	(7.49)	(7.51)	(7.50)
Trade Openness	0.108	0.0190	0.115	0.152	0.137	0.161
	(0.68)	(0.16)	(0.60)	(1.28)	(1.15)	(1.36)
Log (POP)	–1.353***	–1.236***	–1.507***	–1.293***	–1.303***	–1.280***
	(–2.94)	(–3.66)	(–2.93)	(–3.87)	(–3.88)	(–3.83)
Constant	24.27***	15.05***	23.73***	18.94***	18.67***	19.29***
	(3.11)	(3.48)	(2.93)	(4.11)	(4.02)	(4.18)
Country Fixed Effects	YES	YES	YES	YES	YES	YES
N	350	448	448	448	448	448
R^2	0.99	0.98	0.99	0.99	0.98	0.97

Notes: Significance levels: *p < 0.10, **p < 0.05 and ***p < 0.01. t-statistics in parentheses. Trade Openness is defined as (imports + exports)/GDP. Asia-Pacific countries include Australia, Bangladesh, Cambodia, China, India, Indonesia, Japan, Laos, Malaysia, Nepal, New Zealand, Pakistan, Philippines, Russia, Singapore, South Korea, Sri Lanka, Thailand, and Vietnam.

Table 6. Estimated coefficients from the SUR method for the demand for military expenditures, 1991–2015.

Variable	China	South Korea	Japan	India	Pakistan	Bangladesh	Sri Lanka	Malaysia	Philippines	Australia	New Zealand
Spillovers	0.00793***	0.000686	–0.0006*	0.0007	0.0032***	–0.0027	–0.0125***	0.01***	0.00009	0.003***	–0.0001
	(3.05)	(0.68)	(–1.83)	(0.51)	(2.62)	(–1.50)	(–4.33)	(4.19)	(0.07)	(3.53)	(–0.15)
Log (GDP)	1.107***	0.193*	0.469	0.795***	0.509***	1.043***	0.775***	0.457***	0.417***	0.945***	0.366***
	(13.45)	(1.68)	(1.58)	(11.29)	(8.97)	(11.02)	(7.80)	(4.68)	(8.22)	(7.70)	(3.18)
Trade Openness	–0.433	0.781***	–0.216	–0.0190	–0.0194	–0.488**	–0.526	0.356**	0.0868	–0.862*	–1.180**
	(–0.95)	(4.16)	(–0.68)	(–0.08)	(–0.10)	(–2.09)	(–1.31)	(2.45)	(0.62)	(–1.82)	(–2.35)
Constant	–10.33***	17.87***	11.24	1.930	8.117***	–4.099*	7.526***	5.386***	10.79***	–3.446	12.69***
	(–3.75)	(5.66)	(1.31)	(0.98)	(6.73)	(–1.70)	(3.69)	(2.63)	(10.34)	(–1.10)	(4.73)
N	24	24	24	24	24	24	24	24	24	24	24
Log of the Likelihood function = 482.1

Notes: Significance levels: *p < 0.10, **p < 0.05 and ***p < 0.01. Spillovers for a particular country consists of Australia, Bangladesh, Cambodia, China, India, Indonesia, Japan, Laos, Malaysia, Nepal, New Zealand, Pakistan, Philippines, Russia, Singapore, South Korea, Sri Lanka, Thailand, and Vietnam minus the country itself.

Table 7. Estimated coefficients from the SUR method for the demand for military expenditures, 1991–2015.

Variable	China	South Korea	Japan	India	Pakistan	Bangladesh	Sri Lanka	Malaysia	Philippines	Australia	New Zealand
Spillover1	0.0071*	–0.0042***	–0.0003	–0.0005	0.0030*	–0.0005	–0.02***	0.007*	0.00001	–0.001	–0.002**
	(1.87)	(–3.74)	(–0.66)	(–0.24)	(1.80)	(–0.22)	(–5.72)	(1.65)	(0.01)	(–0.92)	(–2.28)
Spillover2	0.220	0.286***	–0.0484***	–0.0826	–0.00913	0.154	0.592***	0.154	0.0976	0.112***	0.0928**
	(1.42)	(5.04)	(–2.73)	(–0.93)	(–0.13)	(1.56)	(3.99)	(0.88)	(1.26)	(2.59)	(2.08)
Chinese ME		–0.0170	0.0731***	0.336***	0.0886	–0.633***	–0.619***	–0.0416	–0.328***	0.225***	0.0253
		(–0.29)	(3.21)	(2.68)	(0.84)	(–3.92)	(–3.07)	(–0.21)	(–3.27)	(3.50)	(0.44)
Log (GDP)	1.019***	0.0182	0.638**	0.397*	0.317	2.018***	0.550	0.220	0.946***	0.133	–0.00288
	(5.46)	(0.17)	(2.36)	(1.87)	(1.15)	(5.72)	(1.59)	(0.52)	(4.62)	(0.74)	(–0.02)
Trade Openness	–1.479**	0.295*	–0.566	0.198	0.0426	–0.904***	0.0909	0.388*	–0.00993	–1.412**	–1.611***
	(–2.30)	(1.79)	(–1.63)	(0.65)	(0.14)	(–3.29)	(0.21)	(1.93)	(–0.06)	(–2.52)	(–2.67)
Constant	–42.19**	–15.56**	11.22	18.51	12.70*	–39.19***	–70.15***	–10.22	–8.592	–0.758	8.993*
	(–2.03)	(–2.10)	(1.39)	(1.60)	(1.69)	(–3.08)	(–3.76)	(–0.49)	(–0.99)	(–0.11)	(1.67)
N	24	24	24	24	24	24	24	24	24	24	24
Log of the Likelihood function = 531.4

Notes: Significance levels: *p < 0.10, **p < 0.05 and ***p < 0.01. Spillover1 consists of Bangladesh, Cambodia, India, Indonesia, Laos, Malaysia, Nepal, Russia, Singapore, Sri Lanka, Thailand, and Vietnam. Spillover2 consists of Australia, Japan, New Zealand, Pakistan, Philippines, South Korea and United States. Both spillover terms are in log form.

Stockholm International Peace Research Institute. 2017. SIPRI Extended Military Expenditure Database. Accessed 30 September 2017. http://www.sipri.org/databases/milex.

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