Funding and Defunding Military Spending - 200 Years of Evidence

Armin A. Bolouri, Tim Lohse and Salmai Qari

No 12226, CESifo Working Paper Series from CESifo

Abstract: We provide the first global, long-run analysis of how governments fund and de-fund military spending. Constructing a panel of 167 countries from 1817 to 2024, we estimate fiscal responses to armaments and disarmaments, including wartime shifts. Deficit spending is the primary financing policy, while larger armaments trigger deeper cuts to civilian spending. Fiscal space is a critical moderator: low-debt countries rely mainly on borrowing, whereas high-debt countries resort to taxation and budget reallocations. Armaments and disarma-ments have asymmetric effects: disarmaments only partially reverse prior poli-cies, sustaining elevated civilian spending as a fiscal peace dividend and leaving the state permanently larger.

Keywords: military spending; war Finance; fiscal space; peace dividend (search for similar items in EconPapers)
JEL-codes: E6 H1 H56 H60 N4 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_12226

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