Abstract
I explore whether the level of democracy has an impact on the income sensitivity of military expenditures. Such an impact can exist if military support is a substitute for popular support in nondemocracies but not in democracies. For a panel of developing and less developed countries, I find that the sensitivity of military expenditures to income changes decreases with the level of democracy.
Acknowledgement
The author thanks Roy Boyd for helpful comments.
Notes
1For example, Mulligan et al. (Citation2004), Dunne and Perlo-Freeman (Citation2003a), Wall (Citation1996) and Beenstock (Citation1993).
2The presence of a lagged dependent variable in Equation 1 can introduce potential biases if standard panel techniques are used. The Anderson–Hsiao methodology of time differencing Equation 1 overcomes this problem but can be inefficient. The Arellano–Bond Generalized Method of Moments (GMM) method, by contrast, can be more efficient as it allows the use of multiple instruments (e.g. Acemoglu et al., Citation2008).
3World Development Indicators database.
4The list of countries is in the Appendix.
5Similar to Wigley and Akkoyunlu-Wigley (forthcoming).
6If uit
are serially uncorrelated, then are correlated with
, because Cov(
,
)
. But
will not be correlated with
for k
2 (Cameron and Trivedi, Citation2009).
7The rejection of the null is interpreted as indicating that at least one of the instruments is not valid (Cameron and Trivedi, Citation2009).