Military in politics and budgetary allocations

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Highlights

  • We estimate the impact of military involvement in politics on defence spending.

  • We use pooled OLS, panel data with fixed effects and instrumental variables.

  • High degrees of military engagement increase their relative share of output.

Abstract

This paper investigates the effect of military involvement in politics on budgetary allocations for defence. We employ a variety of econometric models, including pooled OLS and panel data with fixed effects and control for other known determinants of military spending. To deal with endogeneity issues, we also use an IV methodology and find that a higher degree of military involvement in policy-making increases the probability that the military obtain a larger share of output.

Introduction

Following the so-called “Arab Spring”, a revolutionary wave of protests and disorders across the Arab world in 2011, scholarly research on civil-military relations has become one of the fastest growing areas in economics and political science. This paper explores an important yet overlooked facet of the civilian oversight of the armed forces, the relation between budgetary allocations for defence and the military involvement in politics.

Military spending is a sensitive economic issue and its impact on economic growth, development, international debt, corruption, and on the risk of armed conflict have been extensively explored by a number of scholars (e.g. Gupta et al., 2001, Dunne et al., 2005, Collier and Hoeffler, 2006, Aizenman and Glick, 2006, Lin and Ali, 2009, Pieroni, 2009, Smyth and Narayan, 2009, Heo, 2010, Dunne and Smith, 2010, Alptekin and Levine, 2011, Kollias and Paleologou, 2013). Given the considerable amount of variation in military spending across countries and over time, another important research area is on the factors determining the demand for military spending (i.e. what a country wants in terms of troops and equipment). A country’s economic wealth, political systems, armed conflicts and the military expenditure of neighbours and rivals are usually found to affect defence spending (see e.g. Dunne and Perlo-Freeman, 2003b, Goldsmith, 2003, Dunne et al., 2008, Nordhaus et al., 2012).

While economic and international determinants have been widely explored by this burgeoning literature, none of the above accounts explains the influence of institutional actors in allocative decisions, in particular whether and to what extent the role of the military in domestic policy-making affects patterns of defence spending.1 We anticipate that not only the armed forces are central in bringing about institutional change, as the recent events in Egypt in 2013 suggest, but the extent to which they intervene in politics is one of the key dimensions along which military spending differs across countries.

Most of the existing literature on the political determinants of defence spending focuses on differences between democracies and autocracies and finds that autocracies devote more of their economic resources to military spending than do democratic systems (e.g. Hewitt, 1992, Goldsmith, 2003). In a novel work, Albalate et al. (2012) find that presidential democracies spend more than parliamentary systems on defence, whereas its interaction with a majoritarian electoral rule reduces the defence burden. Their results are consistent with Linzs (1990) theory: the armed forces can act as a leveraging power in situations of institutional conflicts between the president and the parliament. If the military is capable of exerting this influence, this should be mirrored by higher defence burdens (see Albalate et al., 2012, p. 288). In this article, we further explore to what extent military influence over the decision-making process has consequences for the allocation of resources and the level of budgetary support acquired by the military.

Coups d’état, which are usually followed by the installation of a military regime, are the primary way by which the military exerts its institutional influence. Yet, in most cases the political role assumed by the military fits more easily along a continuum rather than within clearly distinct boxes. Several civilian nondemocratic regimes survive with the external support of the military, and even consolidated democracies where civilian control of the military is the norm are not immune from a degree of military influence. By explicitly taking this factor into account, we consider more subtle linkages between the political influence exerted by the military and the amount of resources diverted to their apparatus. We use the International Country Risk Guide (ICRG) system (Howell, 2011), a model for forecasting financial, economic, and political risk. In particular, we look at one subcomponent of the political risk, “military in politics”, which measures the military participation in government on a six-point scale. This scale can be used as a barometer of the extent to which civilian political institutions are penetrated by military personnel, factions and interests.

To assess the impact of military in politics on budgetary decisions, we use a large panel of 135 countries for the period 1984–2009 and include a variety of model specifications to deal with the presence of correlation within countries, time-invariant unobservable confounders and endogeneity concerns. We begin Section 2 with a short discussion on how characteristics of civilian-military relations may account for the relative power of military institutions to extract budgetary resources from the state. Section 3 discusses the data and the panel data methodology, while Section 4 presents our empirical results from pooled and fixed-effect models as well as instrumental variable (IV) estimators. Section 5 provides concluding remarks.

Section snippets

The demand for military spending

Models of military spending typically show that a country’s defence budget is significantly affected by the security environment, including the military expenditure of allies, rivals and potential enemies (see Smith, 2009, for an extensive review). While external factors are certainly important, domestic institutional factors should also hold explanatory power. In fact, constitutional systems and electoral rules have important implications for the size of the government and economic policies (

Data and empirical strategy

The data on the level of military in politics come from International Country Risk Guide (ICRG) rating, which comprises 22 variables in three subcategories of risk (political, financial, and economic) from 1984 to 2009. Our variable of interest is “military in politics”, and ranges from 0 to 6, where lower risk ratings indicate “a greater degree of military participation in politics and a higher level of political risk”. The classification is made on the basis of subjective estimates of the

Results

The main results are presented in Table 1, Table 2, Table 3, Table 4. Table 1 provides estimates for alternative versions of the pooled-OLS, Table 2 makes use of fixed effect models and Table 3, Table 4 display the IV estimates. We also run additional models, whose results are meant to provide robustness checks. We briefly discuss them in this section and include them in the appendix.

The baseline model in Table 1 assesses the importance of institutional determinants of defence spending;

Conclusions

In this paper we examine how the level of military involvement in politics affect military’s chances to redistribute resources towards their members through the manipulation of the country’s defence burden. In particular, we claim that not only are the armed forces central in bringing about institutional change, but the extent to which they intervene in policy-making is important in explaining why and how much military burden differs across countries. We use a variety of econometric

Acknowledgments

We wish to thank Emanuele Ciani, Claudio Deiana, Leandro Elia, Ludovica Giua, Tullio Jappelli, Matthias Parey, David Reinstein, Petros Sekeris, Saverio Simonelli and Ron Smith for valuable comments on earlier versions of the manuscript. We also appreciate the suggestions of two anonymous referees. The responsibility for any remaining errors or omissions is our own.

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