The Real Military Balance: International Comparisons of Defense Spending

International comparisons of military spending are necessary for monitoring security risks, assessing defense capabilities, and planning defense budgets. Nevertheless, conventional comparisons do not allow for differences in defense sector input prices across countries. I use defense sector budget data to construct a database of military purchasing power parity (PPP) exchange rates for 59 countries. Real military spending in many countries, including Russia and China, is found to significantly exceed conventional estimates based on market exchange rates and GDP‐PPP exchange rates. Similarly, the US share of world military spending is substantially diminished.