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Defence and Peace EconomicsPublication details, including instructions for authors andsubscription information:http://www.tandfonline.com/loi/gdpe20

Defense Spending, Natural Resources,and ConflictHamid E. Aliaa School of Global Affairs and Public Policy, The AmericanUniversity in Cairo, New Cairo, EgyptPublished online: 08 Dec 2014.

To cite this article: Hamid E. Ali (2015) Defense Spending, Natural Resources, and Conflict,Defence and Peace Economics, 26:1, 1-3, DOI: 10.1080/10242694.2013.848581

To link to this article: http://dx.doi.org/10.1080/10242694.2013.848581

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INTRODUCTION

DEFENSE SPENDING, NATURAL RESOURCES, ANDCONFLICT

This special edition is the product of the 16th Annual International Conference onEconomics and Security, held at the American University in Cairo, Egypt, 2122 June2012. The conference was organized by the Department of Public Policy and Administra-tion, American University in Cairo, Economists for Peace and Security (Egypt), Economistsfor Peace and Security (UK), Economists for Peace and Security (US), and the School ofGlobal Affairs at the American University in Cairo. The conference addressed a trajectoryof current issues pertaining to the region and across the globe, ranging from applied totheoretical. The conference participants are policy scientists and researchers from differentacademic institutions and parts of the world, including Egypt, the UK, Greece, the USA,Sweden, China, Turkey, Italy, Germany, South Africa, the Netherlands, Portugal,Switzerland, and Spain.

The rst article, by Ali and Abdellatif, discusses the military expenditures and naturalresources in the Middle East and North Africa (MENA). The authors argue that the militaryacts as the protector of regimes in MENA countries, as demonstrated by the Arab Spring:regimes fell when the military withdrew its support, as in the cases of Egypt and Tunisia.The regime must pay a premium to hedge against this risk. Having natural resources suchas oil will reduce the opportunity costs of increasing military spending. In support of theresource curse hypothesis, the authors claim that an abundance of natural resources, par-ticularly oil, encourages increases in military spending. In contrast, the rent from coal andnatural gas has a negative impact on military spending, while the rent from minerals has noimpact on military spending.

Despite the impressively large literature on the effect of military spending on theeconomic growth nexus, the second article, by Dunne and Tian, introduces robustness ofthe parameter estimates of growth models across a group of countries, with a special focuson heterogeneity and nonlinearity. Using a balanced panel of 104 countries from 1988 to2010, the estimate provides strong support for the negative impact of military burden ongrowth. When countries were grouped by developed vs. developing countries, the long runof developed countries was signicant. When countries that had both an abundance of natu-ral resources and low foreign-aid receipts were considered as a group, there were no effectsof military burden on growth. All ndings show that the impact of military spending ongrowth ranges from negative to insignicant, but there is no evidence to support a positiveimpact.

The third paper, by Lin et al., examines the relationship between defense and socialwelfare expenditures specically, health and education using a panel of OECD countriesfrom 1988 to 2005. The authors adopt the panel generalized method of moments (panel

2014 Taylor & Francis

Defence and Peace Economics, 2015Vol. 26, No. 1, 13, http://dx.doi.org/10.1080/10242694.2013.848581

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GMM) to allow for endogenous right-hand-side variables, where the panel data structureprovides an excess of moment conditions available for estimation, taking advantage ofgreater instruments as a result of lag variables. The nding suggests a positive trade-offbetween defense spending and social-welfare expenditures. Although the authors used dif-ferent data-sets and different empirical techniques, the ndings are consistent with previousstudies (see Ali, 2011; Harris and Pranowo, 1988; Kollias and Paleologou, 2011; Yildirimand Sezgin, 2002).

The fourth paper, by Tngr and Elveren, provides detailed ndings that shed light onthe complicated nature of the relationship between defense spending, inequality, and typesof political and welfare regimes. The author used the taxonomy of welfare regimes, includ-ing social-democratic, corporatist, liberal, post-communist, and productivist. The welfarestate in general can be dened as an interventionist state that seeks to protect a minimumstandard of citizen well-being. The nding that there is a positive relationship betweenincome inequality and share of military expenditures, and that terror is statistically signi-cant factor that affects both the level of military expenditure and inequality, are in line withthe results of Ali (2007). In addition, the study shows that welfare regimes other thansocial-democratic ones in developing countries are more likely to have higher shares of mil-itary expenditures in the central government budget than developed countries.

The fth article, by Ecer and Veasey, analyzes the defense spending preferences in theUSA using ordered logistic regression analysis. The authors use the political economy ofdefense spending and public opinion toward defense spending as bases to structure the pref-erences expressed by individual voters. The analysis of the longitudinal data from 1980 to2008 shows that party identication as Republican, or having a vested interest in defenseindustries, do correlate with a preference for increasing defense spending. Security moms,and demographic groups other than white, do not express a preference for more defensespending.

The sixth paper, by Elbadawi and Soto, contributes to the literature on resource curseand violent civil conicts by extending Bodea and Elbadawi (2007) and modeling the haz-ard of armed civil conict as a manifestation of the natural resource curse. The authorsexplicitly account for the role of good economic and political institutions in deterringrecourse to violence, as well as the extent to which these institutions might weaken theresource-rents effect. The authors found a robust and positive association between resourcerents per capita and the occurrence of armed civil conict. In summary, good economic andpolitical institutions do reduce the hazard of conict; and strong political institutions forchecks and balances appear to weaken the impact of resource rents on conicts.

In the nal paper, Carbonnier examines the dynamic relationship between extractiveresource dependence, armed violence, and sustainable development in a panel covering 104developing countries over the recent commodity price boom period. The authors resultssupport the resource-curse argument by examining sustainable development outcomes asmeasured by adjusted net savings (ANS) per capita. The natural capital depletion reducesgenuine savings. Resource dependence tends to be associated with a higher probability ofarmed conict and higher homicide rates, both of which have a signicant negative impacton ANS per capita. The author shows that an increase of one sample standard deviation inresource dependence, as measured by oil, gas, and mineral exports, depletes ANS per capitaby more than $35.

2 INTRODUCTION

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References

Ali, H.E. (2007) Military expenditures and inequality: Empirical evidence from global data. Defence and PeaceEconomics 18(6) 519535.

Ali, H.E. (2011) Military expenditures and human development: Guns and butter arguments revisited: A case studyfrom Egypt. Peace Economics, Peace Science and Public Policy 17(1) 119.

Bodea, C., and Elbadawi, I. (2007) Riots, Coups, and Civil War: Revisiting the Greed and Grievance Debate.World Bank Policy Research Working Paper 4397, Washington, D.C.

Harris, G. and Pranowo, M.K. (1988) Trade-offs between defence and education health expenditures in developingcountries. Journal of Peace Research 25(2) 165177.

Kollias, C. and Paleologou, S.M. (2011) Budgetary trade-offs between defence, education, and social spending inGreece. Applied Economics Letters 18(11) 10711075.

Yildirim, J. and Sezgin, S. (2002) Defence, education and health expenditures in Turkey 192496. Journal ofPeace Research 39(5) 569580.

HAMID E. ALISchool of Global Affairs and Public Policy, The American University in Cairo,

New Cairo, Egypthali@aucegypt.edu

INTRODUCTION 3

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