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The demand for military expenditures: An international comparison

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Abstract

Earlier studies have explained inter-country variations in the share of GNP devoted to military expenditures by international spillovers and by differences in the threat of attack related to relative incomes. In this paper, we use the theory of public choice to explain these differences. We attempt to measure the importance of both international spillovers and relative incomes, along with two other factors: the tax-price elasticity of demand and economies of scale in the consumption of security.

We find that international spillovers are significant and positive, that the income elasticity of demand is greater than unity, that the tax-price elasticity of demand explains part of observed inter-country differences, and that there are considerable economies of scale in the consumption of military spending. Finally, between 1960 and 1975, there was apparently a substantial increase in the value which each country derived from a dollar of military spending by its allies. This phenomenon, which seems related to the increased importance of deterrent weapons, has tended to induce individual alliance members to reduce the share of their national income devoted to defense.

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Authors and Affiliations

  1. Université de Montréal, Canada

    Leonard Dudley

  2. Université de Montréal, Canada

    Claude Montmarquette

Authors
  1. Leonard Dudley
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  2. Claude Montmarquette
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Additional information

We wish to thank Professor Marcel G. Dagenais for his suggestions in dealing with the simultaneity problem encountered with our model. We are also grateful to Thomas Borcherding and the participants in the Carnegie Conference on Political Economy for their comments. Denis Bolduc and Paul Forest made significant contributions as research assistants. Benoit Lyrette and Claude Dallaire were helpful at an earlier stage of the work. This research was financed by the Centre de Recherche en Developpement Économique of the Université de Montréal and by the Social Sciences and Humanities Research Council of Canada. Any remaining errors are our responsibility.

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Dudley, L., Montmarquette, C. The demand for military expenditures: An international comparison. Public Choice 37, 5–31 (1981). https://doi.org/10.1007/BF00124229

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