Abstract
This paper takes advantage of the new extended military expenditures dataset from the Stockholm International Peace Research Institute (SIPRI) to estimate demand for military expenditures model for the Middle East and North Africa (MENA) region. The extended dataset affords us to adopt robust dynamic panel estimation techniques along with a set of threat and strategic interaction proxies. Our analysis indicates that status seeking (“peer pressure”) explains the bulk of the demand for military spending in the region. We also note a significant trade-off between military and social spending, somewhat mitigating the arms race implied by status. “Resource Curse” is not a significant determinant of military spending in the region especially when applying a robust dynamic specification. We find negative and weak response to local and regional threats suggesting the need for more sophistication in the design of threat proxies.
Acknowledgements
We are grateful to Professor James Finan for providing us with updated threat variables and continuous help throughout the project. We also thank the editor and anonymous referees for insightful comments and suggestions.
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