Models of military expenditure

A brief review of the extensive empirical literature devoted to explaining levels of military expenditure indicates a wide variety of unreconciled results. However, comparing the alternative models is not straightforward. This paper uses British post‐war military expenditures to illustrate some of the methodological issues involved in model comparison, evaluation and selection. Starting from two published models for the UK, a systematic specification search leads to a new model, which dominates alternative specifications, passes a wide range of misspecification tests, and also fits well to French data.