The Demand for Military Expenditure in Developing Countries: Hostility Versus Capability

This paper considers the interpretation of the empirical results of the developing literature on the demand for military spending that specifies a general model with arms race and spill‐over effects and estimates it on cross‐section and panel data. It questions whether it is meaningful to talk of an ‘arms race’ in panel data or cross‐section data, and suggests that it may be more appropriate to talk about the relevant variables – aggregate military spending of the ‘Security Web’ (i.e. all neighbours and other security‐influencing powers) and the aggregate military spending of ‘Potential Enemies’ – as acting as proxies for threat perceptions, which will reflect both hostility and capability.