Does Military Spending Stabilize or Destabilize Governments? International Analysis

Rajeev K. Goel and Michael A. Nelson

No 12707, CESifo Working Paper Series from CESifo

Abstract: Military spending by nations has the potential to either stabilize governments or destabilize them (via threats of coups, for instance). We study this relationship formally by using a rich dataset on more than 150 countries, spanning nearly two recent decades from 2006 to 2023. Among other relevant factors, the analysis pays special attention to the role of corruption. The main results show that both military spending and corruption increase fragility. When three-year intervals are studied over the large time span, the positive effect of corruption remains robust, but the positive effect of military spending loses statistical significance over some periods. In other findings, greater economic prosperity promotes stability, while greater economic uncertainty has the opposite effect. Democratic nations tend to be more stable, but this is not necessarily true of presidential democracies. Furthermore, ethnic fractionalization and genetic distance promote instability, but population density has the reverse effect. Finally, considering the endogeneity of corruption via IV regressions supports the main findings, and the mediation analysis shows little mediation. Policy implications are discussed.

Keywords: state fragility; military spending; corruption; democracy; economic uncertainty; ethnicity (search for similar items in EconPapers)
JEL-codes: D74 F50 H11 H56 K42 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_12707

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