The effect of military service system change on the demand for military expenditure

Abstract

There has been a distinct trend of military service system change from conscription to enlistment around the world. This study aims to investigate how this change affects the demand for military expenditure. Our model is based on neoclassical model. Empirically, a two-break unit root test is applied to test the endogeneity of structural changes along with the system change. Then, an autoregressive distributed lag model is used to examine the effects on military expenditure. The empirical results show that the demand for military expenditure partly coincides with the system change. The effect of GDP on military expenditure is larger in countries with conscription than in those with enlistment.

Keywords:

• Military service system
• Military expenditure demand
• Structural changes

JEL Codes:

• H56
• C22

Acknowledgments

We appreciate the financial support from the National Science Council of the Executive Yuan (Taiwan) (NSC 99-2410-H-035-017-). The paper has benefited from insightful comments and constructive suggestions by an anonymous referee. The usual disclaimer applies.