The demand for military spending in developing countries: A dynamic panel analysis∗

An earlier version of this paper was presented to the Second CesA/IDN International Conference on Defence Economics and Security in Mediterranean and Sub-Saharan Africa , Lisbon, June 2002. We are grateful to the participants for comments. Dunne is grateful to the ESRC for support under grant R00239388.

Estimating demand functions for developing countries before and after the end of the Cold War, Dunne and Perlo-Freeman (2003) found little evidence of any change in the underlying relationship. One concern with their analysis was that the use of cross-section averages might have obscured important time series effects. This paper deals with this issue by analysing their data using static and dynamic panel data methods. This produces evidence of a change in relationship and suggests that the focus in the literature on cross-section analyses has indeed limited our understanding of important dynamic processes at work within countries.

Keywords:

• Military Spending
• Developing Countries
• Demand

Notes

An earlier version of this paper was presented to the Second CesA/IDN International Conference on Defence Economics and Security in Mediterranean and Sub-Saharan Africa , Lisbon, June 2002. We are grateful to the participants for comments. Dunne is grateful to the ESRC for support under grant R00239388.