How a government distributes its resources is a function of political institutions, internal

and external environmental factors, and the policy preferences of its leadership (Jones et al.

2009). Consistent with this, a state’s regime type and involvement in an interstate war exert

strong influences on patterns of social and military spending (e.g., Huber, Mustillo, and Stephens

2008, Goldsmith 2003). Recent work on the role of political leaders has increased our

understanding of how regime type affects the distribution of resources, particularly between

public and private goods (inter alia Bueno de Mesquita et al. 1999). The primary argument for

analyzing political leaders and the incentives and choices they face is straightforward: neither

states nor governments but political incumbents make policy decisions. Following this logic, in

this article we analyze how regime type and interstate war interact to influence the incentives a

political executive has to distribute resources to social and military spending.

We argue that a political leader allocates resources to social and to military spending as a

function of their efficiency in securing her political survival. We argue that the comparatively

larger role of the public in democratic winning coalitions makes social spending relatively more

efficient than military spending in guaranteeing a democratic leader’s tenure. In contrast, the

larger influence of the civilian elite and military in autocratic politics makes military spending

relatively more efficient in securing the political survival of dictators.1 We derive four

hypotheses concerning the relationship between regime type, interstate war and government

spending that are either novel, address an overlooked topic, or run counter to existing literature.

Statistical analyses provide consistent support for our hypotheses. We find that, compared to

democracies, autocratic regimes cut education spending more during war-time and increase

education spending to a greater degree after the conclusion of an interstate war. Our analyses

1 The terms non-democracy, autocracy, dictatorship, and their derivatives are used interchangeably throughout the article to refer to those forms of government that are not democratic.

1

demonstrate that the processes of mobilization for and demobilization from interstate war affect

social spending differently in democratic and non-democratic countries. We also find that,

relative to democratic countries, autocracies increase military spending to a greater degree during

an interstate war and then, upon the war’s termination, cut military spending to a larger extent.

The finding that non-democracies allocate more of their economic resources to waging interstate

war runs counter to some of the research on democratic success in interstate wars (Bueno de

Mesquita et al. 2003).

The remainder of the paper proceeds as follows. We first review existing explanations of

social and military spending as a function of regime type and interstate conflict. We then present

our argument for how the optimal allocation of guns and butter varies for autocratic and

democratic leaders during times of peace and interstate war. The third section derives

hypotheses concerning variation across regime type in the processes of economic mobilization

for and demobilization from interstate war. We then describe our empirical models before

presenting the results of our statistical analyses. We conclude with a discussion of the

implications of our findings.

1 The Influence of Regime Type and Interstate War on Government

Spending

A comprehensive review of the literature on the complex relationships among

government spending, interstate war, and regime type is far beyond the scope of this article. We

focus our attention on scholarship that has examined how and why military and social spending

differ in democracies and dictatorships and the influence of war on these types of spending.

2

1.1 Military Spending

General agreement exists among scholars that autocracies allocate more of their

economic resources to military spending during times of peace than do democracies (e.g.,

Goldsmith 2003). Theoretical explanations for this empirical phenomenon, however, vary.

Garfinkel (1994) argues that military spending crowds out consumption opportunities for the

public. Democratic politicians concerned with electoral outcomes consequently have an

incentive to keep military expenditures low that autocrats do not. Fordham and Walker (2005)

add that the importance of avoiding an intensification of the security dilemma could also explain

why democracies spend less on the military than do non-democracies.

The relationship between military spending and regime type during war, however, is less

established. A number of scholars conclude that democracies allocate more of their economic

resources to the military during times of war than do autocracies. Lake (1992) argues that

democracies’ greater wealth allows them to outspend non-democracies during war. Schultz and

Weingast (1998, 2003) posit that liberal governments have access to international credit at

relatively lower interest rates, allowing them to spend more on their militaries during interstate

conflicts than their autocratic rivals. Bueno de Mesquita et al. (1999, 2003, 2004) argue that, due

to the relative importance of providing public goods and private benefits across regime type,

democratic (or large-W) leaders are more likely to be removed from office if they fail to win an

interstate war than are autocratic (or small-W) leaders. Consequently, democratic incumbents

have a greater incentive to win interstate wars . Goldsmith (2007) claims that the greater

political competition in democratic systems gives democratic politicians the incentive to increase

military spending during war-time to a greater degree than their autocratic counterparts.

3

Other research casts doubt on this conclusion. Examining major power participation in

the global wars of the twentieth century (Russo-Japanese, WWI and WWII), Kugler and Domke

(1986) find no relationship between a state’s form of government and the material resources

allocated to waging war. In their analysis of democratic success in interstate wars, Reiter and

Stam (2002) fail to find a significant relationship between regime type and a country’s defense

burden in the population of war participants between 1816 and 1990.

1.2 Social Spending Scholars generally agree that democracies allocate more of their economic resources to

social programs when at peace than do autocratic regimes (Huber, Mustillo and Stephens 2008,

Haggard and Kaufman 2008). Lake and Baum (2001) argue democracies should provide more

social benefits to their citizens than autocracies because contestability is higher in democracies.

Selectorate theory predicts that democratic leaders should allocate a greater portion of their

available resources to social spending than autocratic incumbents, and Bueno de Mesquita et al.

(2003) find a positive relationship between the size of a leader’s winning coalition and health

care and education spending.

While democracies are understood to spend more on social programs than autocracies

during peace-time, we are unaware of any systematic research that examines the relationship

between regime type and social spending during times of war. Some work (e.g., Bueno de

Mesquita et.al, 199, 2003, 2004; Goldsmith, 2007) argues that democratic leaders should be

willing to spend as many of their resources as necessary to win an interstate war, but does not

speak directly to the effects of war involvement on social spending. We argue that focusing on

the relative efficiency of guns and butter for securing a leader’s political survival and how

4

regime type and interstate war affect this relationship allows for the development such a

theoretical argument.

2 Theoretical Argument

We argue that variation in the membership of winning coalitions and the consequences of

interstate war outcomes for leadership survival across regime type imply different optimal

allocations of social and military spending for office-valuing leaders during times of peace and

war. Our argument follows from a set of fairly simple assumptions. The first speaks to our

explanation for how and why leaders allocate economic resources between social and military

spending. The next two account for why the optimal distribution of resources, including those for

guns and butter, for an incumbency-valuing leader varies across regime type. Our final

assumptions incorporate involvement in an interstate war into the leaders' allocation decisions.

We begin with a discussion of the factors that influence a leader’s allocations of social

and military spending. First, we assume that all political incumbents seek to retain office. We

further assume that all political executives require the support of a winning coalition to remain in

power, where an incumbent’s winning coalition is defined as the subset of those people who

have a say in choosing a government’s leadership whose support is necessary for an incumbent

to retain office (Bueno de Mesquita et al. 1999, 2003). Third, we assume that a winning coalition

decides whether to remove the incumbent in favor of a domestic challenger as a function of the

value it places on how a leader allocates the resources available to her. Fourth, we assume that

political leaders use government spending to distribute a bundle of benefits to their citizens. The

most politically salient components of that bundle (and the most interesting for our immediate

purposes) are social spending (butter) and military spending (guns). To be clear, we do not

5

suggest that social and military expenditures are the only forms of government spending nor

imply that there is an inherent trade-off between the two. There is significant research, in fact,

that indicates a standard guns-butter trade-off does not exist (e.g., Domke, Eichenberg and

Kelleher 1983, Mintz 1989, Palmer 1990, Heo and Bohte 2012). Governments allocate

resources to the bureaucracy, debt servicing, and a number of other purposes besides guns and

butter. However, our interests are on the allocation of scarce resources to military and social

spending, as that allocation influences a leader's expected tenure in office. Last, we assume that

political incumbents implement the policies that most efficiently ensure their political survival.

These assumptions imply that a leader will allocate the combination of social and military

spending preferred by her winning coalition. The logic behind this claim is simple. As all

incumbents prefer to remain in office, a leader should implement those policies needed to secure

the support of her winning coalition. Because a leader’s winning coalition decides whether to

retain or replace her based on how much they value the incumbent’s distribution of the country's

resources, it follows that an office-valuing incumbent’s optimal allocation of social and military

spending is the distribution preferred by her winning coalition.

The above logic outlines the general allocation decision faced by incumbents. While it

provides an intuitive account of how leaders distribute the scarce national resources available to

them, on its own it cannot speak to how patterns of social and military spending vary across

regime type. Investigating this question requires that we consider who is in autocratic and

democratic winning coalitions and their preferences for guns and butter. To do this, it is useful to

divide a nation’s population into two groups: the public and the elite. A nation’s elite consists of

two sub-groups. The first sub-group is the civilian elite, a small group of wealthy members of a

society. The second is the leading figures in the military. While clearly not all members of the

6

military are wealthy, the interests of the rich and the military often align. It is unsurprising, then,

that the two groups frequently ally against the public (O’Donnell and Schmitter 1986, Acemoglu

and Robinson 2006). In comparison to a nation’s elite, members of the general public are more

numerous and, on average, poorer.

The winning coalitions of dictators and democratic leaders are drawn from systematically

different segments of a country’s population. As Bueno de Mesquita et al. (2003) discuss, the

relatively small winning coalitions of autocratic incumbents are made-up almost exclusively of

members of a society’s elite.2 The comparatively high level of political participation associated

with democracy, on the other hand, result in democratic leaders requiring the support of a large

portion of the general public to remain in power (e.g., Dahl 1971). The winning coalitions of

democratic leaders consist of proportionately more members of the general public than do the

winning coalitions of autocrats.

Variation in the make-up of autocratic and democratic winning coalitions is important for

our purposes because members of the general public and elite have incentives to prefer different

distributions of the country's resources: members of the public generally prefer greater

allocations of resources to social spending and less to military spending than members of a

society’s elite. This statement follows from four observations. First, the general public benefits

from social spending to a greater degree than does a society’s civilian elite. Put succinctly, the

civilian elite are able to provide for themselves those benefits the poorer members of the general

public obtain through the social programs that make up the modern welfare state (e.g., education,

health care, food subsidies). Second, the benefits that accrue to the general public via the social

2 As one would expect, the relative influence of the civilian elite and military can vary substantially across types of non-democratic regimes – for instance the make-up of the winning coalitions of a civilian dictatorship and a military junta. Investigating the implications of this variation for patterns of social and military spending is beyond the scope of this manuscript and must be left to future research.

7

welfare state are financed via taxes on the wealthy civilian elite (Przeworski et al. 2000, Boix

2003). The civilian elite therefore pay for the social welfare state while deriving significantly

fewer benefits than the general public. Accordingly, compared to the civilian elite the general

public have personal, material incentives to prefer more government resources be allocated to

social welfare, a claim consistent with the negative relationship between income and support for

the welfare state (for example, Cook and Barrett 1992). Turning to military spending, we observe

that it serves different purposes for the general public and members of the military. The public

directly benefits from military spending in its capacity of providing the good of national defense

(Olson 1965), a benefit that equally applies to the civilian elite and the military. However,

members of the military benefit from military spending in an additional and personal way: they

rely on military spending for their livelihoods. Further, members of the military undergo

training, work, and live in an environment that socializes them to place a greater value on

military capabilities and favor higher military spending than the general public (Huntington

1957, Nordlinger 1977). These four observations imply that members of the public have

multiple incentives to prefer proportionately greater social spending while members of a

society’s civilian elite or military prefer higher military spending.

The logic of how leaders allocate government expenditures outlined above implies that

the optimal bundle of goods provided to the country – a bundle that includes a variety of polices

beyond just spending priorities – differs across regime-type. More specifically, the bundle

distributed by a democratic leader consists of relatively more social spending and less military

spending than does the optimal bundle allocated by an autocratic incumbent. The reasoning

behind this claim is straightforward. As a winning coalition decides whether to retain an

incumbent based on her distribution of government resources, drawing on the logic of the

8

median voter theorem (most notably Downs 1957), the most efficient allocation of resources for

an incumbency-motivated leader is the distribution of resources preferred by the median member

of her winning coalition. Given the distributions of who gets into their respective winning

coalitions, this person would be a member of the general public in a democracy and a member of

the elite in an autocracy. As the general public prefers proportionately more social spending and

less military spending than do the elite, the optimal distribution of government spending for a

democratic leader consists of relatively more social spending and less military spending than that

of an autocratic incumbent.

It is worth noting here a key way in which our theoretical argument differs from the

selectorate theory of Bueno de Mesquita et al. (1999, 2003, 2004). We assume that citizens vary

in their policy preferences (social vs. military spending) as a function of their socioeconomic

status (general public vs. elite). In contrast, Bueno de Mesquita et al. assume that all citizens

have the same four policy preferences: more public goods, more private benefits, more leisure,

and lower taxes (2003, pgs. 78-79, 108). Members of a winning coalition are substitutable in

selectorate theory because everyone in a society has the same preferences. Our argument,

though, rests on the assumption that some citizens want their government to allocate resources in

systematically different ways from other citizens. In our approach, it matters which members of

a society are represented in a leader’s winning coalition. While we share the theoretical focus on

incumbency-motivated leaders, our argument differs from selectorate theory in this fundamental

way.

The final portion of our argument incorporates interstate war into the allocation decisions

of autocratic and democratic leaders. Involvement in an interstate war makes military spending

more efficient for all leaders, as the outcome of an interstate war affects an incumbent’s

9

prospects for remaining in power. Most scholars argue that the probability a political leader is

removed from office is greater after losing a war than after winning a war (e.g., Wolford 2007).

This effect is conditional on a country’s form of government, however. Many of the theoretical

accounts of variation in conflict behavior across regime type assume democratic leaders are more

likely to be punished for losing a war than autocratic incumbents (among others, Reiter and Stam

2002, Bueno de Mesquita et al. 2003). Unfortunately this common, intuitive assumption is not

empirically supported. Research by Goemans and colleagues demonstrates that the probability of

losing office conditional on losing an interstate war is greater for autocratic leaders than it is for

democratic incumbents (Chiozza and Goemans 2004, Goemans 2008, Debs and Goemans 2010).

Further, an autocratic leader's expected tenure in office is increased by winning an interstate war

to a greater extent than is a democratic leader's. This has important implications for the

efficiency of military spending during war-time. Specifically, since losing an interstate war

increases the likelihood of a dictator losing office to a greater degree than losing a war affects a

democratic leader's tenure in office, and winning a war has a greater effect on the likelihood that

a dictator retains office than it does on a democratic incumbent, higher levels of military

spending during war-time are significantly more important to the tenure of a dictator than a

democrat.

The relative influence of the public and elite in a leader’s winning coalition affects the

relative efficiency of social programs for an office-valuing incumbent even during war.

Democratic incumbents require the support of the larger public that, compared to a society’s

elite, derives greater utility from social spending. Involvement in an interstate war then requires

democratic leaders to increase military spending to the degree necessary to provide the public

good of national security while avoiding drastic cuts to social welfare. This implies that

10

democratic leaders may select wars that are cheaper, thereby avoiding the need to cut social

spending to finance an expensive war. The decision calculus is more straightforward for

autocratic leaders, who remain in power by retaining the support of a small elite that places little

value on social spending. With war involvement autocratic incumbents should be more willing to

increase military spending than democrats, even if that increased allocation to the military comes

at the expense of funding for social programs. Democratic leaders, on the other hand, require the

continued support of a public that values social programs, will accordingly be less willing to

fund the higher military spending associated with interstate war through cuts in social spending

and will be more likely to use alternative methods to fund the war effort.3

To summarize our argument, incumbency-valuing leaders will achieve the distribution of

social and military spending that most efficiently secures their political survival. Compared to a

society’s elite, the general public prefers – among other things – relatively greater social

spending and less military spending and has more influence in the winning coalitions of

democratic leaders than in the winning coalitions of autocratic leaders. This implies that a

distribution of relatively high social spending and low military spending is more effective for the

political survival of a democratic leader than an autocratic leader. A country’s involvement in an

interstate war increases the efficiency of military spending for all leaders but results in a

relatively larger increase for autocratic leaders, as they are more likely to be removed from office

for losing an interstate war than are democratic leaders. The argument implies, too, that

3 We stress that we leave the source of the increased military spending undefined. While it could occur via cuts to social spending, higher military spending could also be achieved through, among other options, increased taxes, borrowing, inflationary monetary policy, and/or cuts in debt servicing. Indeed, the theory we present suggests systematic variation across regimes in leaders' incentives to utilize different policy options to provide increased military spending, e.g., dictators have a greater incentive to cut non-military spending while democrats are more hesitant to decrease social spending and may, for example, have greater willingness to borrow money on the international market (Schultz and Weingast 2003). Investigating variation across regime type in the use of these other war finance options is well beyond the scope of the current paper and is a topic we address in (REFERENCE WITHHELD.)

11

democratic leaders may avoid expensive wars that might require the reallocation of resources

away from social spending. We now turn to our argument’s implications for the effect of

economic mobilization for and demobilization from interstate war on social and military

spending across regime type.

3 Theoretical Expectations Our theoretical argument yields a number of implications regarding patterns of

government spending in autocracies and democracies. For example, the respective spending

preferences of the public and elite and variation in the degree of their representation in the

winning coalitions of dictators and democrats imply that, in general, democracies should allocate

more resources to social spending and fewer resources to military spending than non-

democracies. These are not novel predictions, nor are they of primary interest to us. More

importantly, our theory implies that democratic leaders, to retain the support of their winning

coalitions, will be more hesitant to cut social expenditures, even in time of war, than will be

autocratic leaders. This implication means that democratic leaders should avoid wars that will

cost them support from their winning coalitions. Some research points to that support being lost

if war turns out badly (Bueno de Mesquita et. al 2003; Reiter and Stam 2002), leading

democracies to select wars that they have a high probability of winning. Our theory implies that

the democratic leaders will select wars that will not require the reallocation of resources away

from social to military spending; that is, our theory tells us that democratic leaders will avoid

wars that are expected to be costly.

Our theory focuses primarily on how regime type conditions the changes in government

spending that accompany economic mobilization for interstate war and, following the conclusion

12

of hostilities, economic demobilization from war. A number of scholars have investigated

patterns of military mobilization (Bueno de Mesquita et al. 2003, Goldsmith 2007), but, with the

notable exception of Bueno de Mesquita et al. (2004), demobilization of military spending has

been ignored in the literature. And, to our knowledge, scholars thus far have not examined the

effect of mobilization and demobilization on patterns of social spending.

Our argument yields four predictions concerning the relationship between regime type

and mobilization for and demobilization from interstate war. The first two predict variation

across regime type in the changes in military and social spending as proportions of GDP

associated with economic mobilization for interstate war.

Hypothesis 1 Autocracies should increase the portion of their national resources allocated to

military spending during an interstate war to a greater degree than democracies.

Hypothesis 2 Autocracies should decrease the portion of their national resources allocated to

social spending during an interstate war to a greater degree than democracies.

These two hypotheses follow readily from our theoretical argument. As outlined above,

leaders are assumed to select the distributions of military and social spending that most

efficiently secure their political survival. Because losing an interstate war increases the

likelihood of a dictator being removed from power to a greater extent than is true for a

democratic leader, the war's outcome is more important for an autocratic leader; implying that

autocratic leaders can be expected to increase military spending during war to a greater extent

than will democratic leaders. Further, the need for democratic leaders to keep the general public

happy with relatively high levels of social spending provides democratic incumbents with a

strong incentive to avoid cutting social spending. A useful way to think about these two points is

13

that the political cost of losing an interstate war provides autocratic leaders with an incentive to

increase military spending even at the cost of decreasing social spending while the political cost

of mobilization provides democratic leaders with an incentive to limit the degree to which they

cut social spending.

The existing literature generally concludes that democracies mobilize their resources to a

greater degree than do autocracies; that is, democracies “try harder” than non-democracies

(Bueno de Mesquita et al. 2003, Goldsmith 2007). While Kugler and Domke (1986) and Reiter

and Stam (2002) find no variation in war effort across regime type, their respective research

designs only include war-year observations, preventing them from explicitly identifying the

relative differences between peace-time to war-time allocations to the military in democracies

and dictatorships. Hypothesis 1 then runs counter to the existing research as it implies that

autocracies should increase military spending during war-time to a greater extent than

democracies. Hypothesis 2, to our knowledge, is the first prediction that explicitly spells out how

war should affect social spending in democratic and non-democratic regimes.

Hypotheses 3 and 4 are concerned with the process of demobilization from interstate war

in democracies and autocracies:

Hypothesis 3 Autocracies should decrease the portion of their national resources allocated to

military spending after an interstate war to a greater degree than democracies.

Hypothesis 4 Autocracies should increase the portion of their national resources allocated to

social spending after an interstate war to a greater degree than democracies.

Our argument implies that demobilization from interstate war results in a peace dividend

for all countries and that the size of the dividend is a function of the degree to which a country

14

mobilized for war. The conclusion of an interstate war removes the incentives a leader had for

increasing military spending and the need for cutting social spending during war-time. The

removal of these incentives should be accompanied by a cut in military spending and increase in

social spending that is more or less complementary to the increase in military spending and

decrease in social spending that occurred during mobilization for war.

The process of demobilization from interstate war largely has been overlooked by

scholars. To our knowledge the lone exception is Bueno de Mesquita et al. (2004), who argue

that the respective reasons democratic and autocratic leaders fight wars results in democracies

demobilizing less than non-democracies following war. Specifically, democracies fight wars in

order to change the policies and regimes of their adversaries while dictators go to war “seeking

the acquisition of territory, slave labor, and booty” (Bueno de Mesquita et al. 2004, pg. 370).

These distinctly different motivations imply that following interstate wars democracies cannot

cut military spending because they then install, financially support, and provide security for the

new regimes in their former rivals while dictators are able to reduce military spending. Our

argument then leads to the same empirical prediction as Bueno de Mesquita et al. (2004) but

follows from a substantially different logic. To our knowledge, scholars have not considered

how the conclusion of an interstate war should affect social spending. Our prediction that

demobilization from an interstate war should be associated with larger increases in social

spending in autocracies than in democracies is novel.

4 Research Design

The hypotheses are tested on the 198 countries included in the Correlates of War state list

(2008) from 1950 to 2001. The country-year data set encompasses 27 wars involving 102

15

participants, per the Militarized Interstate Dispute project (Ghosn, Palmer and Bremer 2004), and

was compiled using the EUGene software (Bennett and Stam 2000).

The analysis of time-series cross-sectional data presents multiple methodological

challenges. Chief among these is accounting for unmodeled unit heterogeneity in the response

variable, which exists when the expected value of the dependent variable systematically varies

across units. Failure to account for these unit effects can result in biased point estimates

(Cameron and Trivedi 2005). A series of joint-F tests revealed the presence of statistically

significant unit effects in both of our dependent variables. Our primary analyses are conducted

using linear regression with fixed-country effects. We use fixed effects estimators because they

are able to account for systematic, unobserved country-level heterogeneity without relying on the

untenable assumption made by random effects models that the explanatory variables in a model

are uncorrelated with the unit effects (e.g., Cameron and Trivedi 2005).4

Diagnostic analyses indicated the presence of missing data, particularly in our measure of

social spending. To address concerns about missing data, we created five imputed data sets for

models estimating each of our dependent variables using the Amelia II software (Honaker, King

and Blackwell 2007).5

4.1 Dependent Variables We predict variation in the proportion of a country’s economic resources allocated to

military and social spending. These hypotheses are tested using two dependent variables. The

first, Defense Burden, is operationalized as the percent of a country’s nominal gross domestic

product (GDP) allocated to nominal military spending in year t. A state’s defense burden is the

4 The correlation between the unit effects and the explanatory variables in the models reported here ranges between 0.46 and 0.63. 5 Details about the imputation procedures are provided in the supplementary appendix.

16

traditional indicator of national military spending in the defense economics literature (for

example, Olson and Zeckhauser 1968, Sandler and Hartley 1995, Fordham and Walker 2005).

Military expenditure and GDP data were taken, respectively, from the national material

capabilities (NMC) data set version 3.02 (Singer, Bremer and Stuckey 1972) and the Expanded

Trade and GDP Data (Gleditsch 2002). Defense Burden covers the period from 1950 to 2001.

We operationalize social spending as the percentage of a country’s nominal GDP

allocated to nominal education spending in year t. Education Spending is taken from the World

Development Indicators (2001) project, and covers the period from 1970 to 1999. Two points

about our use of Education Spending to proxy social spending are worth noting. First, we chose

to use education spending as our empirical indicator for social spending because, outside of a

measure of health care spending from the World Bank, it has better spatial and temporal

coverage than any other measure of social spending we are aware of. We chose not to use health

care spending because its relationship with interstate war is not representative of the larger

relationship between social spending and war. This is because a government will likely need to

increase the resources allocated to health care spending during war-time in order to deal with the

wounded soldiers interstate war produces. Due to its unique relationship among types of social

spending with interstate war, health care spending is not an appropriate dependent variable for

our purposes.6 Second, education spending is only one type of social spending which a leader

might cut in order to finance an interstate war effort, if a leader chooses to cut social spending or

because other sources of funding were unavailable. If leaders partially fund mobilization by

reducing education spending, our analyses almost certainly understate the degree to which

6 Further, it is likely the case that these increases vary across regime type in a systematically different manner than other types of social spending. Autocracies tend to fight more severe wars and suffer greater causalities than do democracies (e.g., Siverson 1995). This would result in a greater increase in health care spending during war in autocracies than in democracies, although this result might be tempered if democracies provide significantly better and more extensive health care than autocracies (e.g., Lake and Baum 2001).

17

leaders cut all social spending. Panel unit root tests indicated that neither the Defense Burden

series nor the Education Spending series are integrated.

Our focus is on what part of the nation's resources are given to military and social

spending during mobilization and demobilization. It is therefore appropriate that we divide our

dependent variables by GDP. War may lead a state to expand its overall budget, which makes

standardizing the spending we are investigating by government expenditure inappropriate and

misleading. Analyzing spending as a proportion of GDP allows the room for the state to increase

the tax effort – increasing the resources given over to a variety of military and social projects –

during wartime while minimizing the likelihood that our analyses are inaccurately capturing an

artificial and artifactual trade-off between guns and butter. Standardizing spending over GDP

also does a better job of capturing our theoretical concepts of interest than measures of raw or

logged spending that ignore the size of the pool of available resources from which a leader can

potentially draw upon to increase military spending.

4.2 Explanatory Variables Our analyses require the use of six explanatory variables. First, Democracy is

operationalized as a state’s value on the 21-point Polity2 index in year t per the Polity IV data set

(Marshall and Jaggers 2005). Democracy ranges from - 10 (full autocracy) to +10 (full

democracy). Our primary analyses use a scalar measure for democracy because dichotomous

treatments of regime type (e.g., Democracy is equal to 1 if Polity2 is greater than or equal +7)

have limited within-panel variation during the time period under investigation and, therefore,

yield inefficient and inconsistent parameter estimates with a fixed effects estimator (Plümper and

18

Troeger 2007, Beck and Katz 2009).7 Second, Interstate War is a dichotomous variable coded 1

if a state is involved in an interstate war in a given year per the Militarized Interstate Dispute

(MID) data set (Ghosn, Palmer and Bremer 2004) and 0 otherwise. The explanatory variable

Post-War is coded 0 in the years before and during a country’s participation in an interstate war

and as the decay function !(!!  !"#$%&'()"*#$+"$,'(#-'.()

in the years following involvement in a

war.8 We use a decay function because the effect of an interstate war on a country’s military and

social spending should wane over time. That is, the effect of demobilization is expected to be

monotonic but is likely non-linear. Post-War takes on a value of 0 for all of the observations of

states that did not participate in an interstate war during the period from 1950-2001.

We argue that the influence of interstate war on a country’s military and social spending

is conditional on its regime type, which requires the use of multiplicative interaction terms (e.g.,

Brambor, Clark and Golder 2006). The interaction terms Interstate War*Democracy and Post-

War*Democracy are the fourth and fifth explanatory variables.

The final explanatory variable necessary to test our predictions is a one-year lag of the

respective dependent variables. Our hypotheses are dynamic and testing them requires that we

be able to estimate how the transitions from peace to war and then from war to peace affect

patterns of government spending. Accordingly, we need to be able to estimate a country’s social

and military spending over time and allow for the values in one year to be a function of the

values in the previous year. Static specifications without a lagged dependent variable preclude

this possibility. In addition to their role in testing our predictions, there are two methodological

reasons to include a lagged dependent variable in our models. First, although some have raised

7 Unfortunately, Plümper and Troeger’s (2007) solution to estimating the effects of variables with low within panel variance has its own problems (Breusch et al. 2011, Greene 2011). 8 Thus, Post-War takes on a value of 1 in the first year following a war’s termination, 0.5 in the next year, 0.333 in the next year, etc.

19

objections to the use of lagged dependent variables (most notably Achen 2000) models specified

with a lagged dependent variable are generally superior to models without a lagged dependent

variable when the underlying data generating process is dynamic (Keele and Kelly 2006).

Second, lagged dependent variables can remove, or at least mitigate, the existence of serial

autocorrelation among the errors (Beck and Katz 2009). Diagnostics revealed the existence of

statistically significant AR-1 processes in both the Defense Burden and Education Spending

series, making the inclusion of the lagged dependent variables methodologically appropriate. 9

We control for the potentially intervening effects of economic development and military

alliances. It is possible that more developed, efficient governments are better at translating

economic resources into war materiel than are less developed countries. This would allow highly

developed countries to obtain the same degree of benefits from a smaller percentage of their

overall resources as less efficient states that allocate proportionally more of their resources to a

war effort. This issue becomes more problematic given the positive relationships between

democracy and economic development (Przeworski et al. 2000) and democracy and military

efficiency (Reiter and Stam 2002). Economic Development is operationalized as a state’s GDP

per capita and is taken from Gleditsch (2002).

Participation in an offensive or defensive military alliance could also be an intervening

variable in our hypothesized relationships. If a state’s ally or allies contribute to the war effort

against a state’s opponent, involvement in an alliance could allow a state to mitigate the degree

to which it needs to mobilize for war. This is potentially a larger confounder if the degree to

which allies come to a country’s aid varies systematically across regime type (e.g., Leeds 2003).

The dichotomous indicator Alliance, coded 1 if a state has either an offensive or defensive

9 The dynamic nature of our predictions means that we cannot accurately test our hypotheses using alternative estimation approaches that model autoregressive processes in the error term (e.g., generalized linear models or generalized estimating equation models).

20

alliance in a given year per the ATOP data set (Leeds et al. 2002) and 0 otherwise, allows us to

account for this possibility.

5 Results

Our analyses yield consistent support for our hypotheses. We find that non-democratic

countries increase military spending and decrease social spending to a greater degree than do

democracies during mobilization for interstate war. The converse holds for demobilization: non-

democracies cut military spending and increase social spending in the years following the

conclusion of an interstate more than do democracies. We present the results of our analyses of

military spending first and then turn to our analyses of the relationship between interstate war,

regime type, and social spending.

5.1 Interstate War, Regime Type, and Military Spending

We argue that, compared to democracies, autocracies will increase military spending to a

greater degree during mobilization for interstate war (Hypothesis 1) and decrease military

spending to a greater degree after the conclusion of hostilities (Hypothesis 3). Our statistical

estimates of these relationships are presented in Table 1; the table reports the mean value of the

coefficients and standard errors and significance levels, as computed by Rubin’s (1987) method,

yielded by the estimation of identically specified statistical models on each of the five Amelia II-

generated data sets (Honaker, King and Blackwell 2007).10 Model 1 includes only those

10 Using Schafer and Olsen’s (1998) notation, the standard errors are computed by taking the square root of T = Ū + (1 + !

!)B, where Tis the total variance associated with the mean coefficient estimate, Ū is the within-imputation

21

variables necessary to test our expectations. Models 2 and 3, respectively, add Economic

Development and Alliance to the baseline specification while Model 4 includes both control

variables.

[Table 1 about here]

Assessing the evidence for or against our hypotheses requires us to compare the relative

increases and decreases of democratic and autocratic defense burdens as a function of their

involvement in an interstate war. We are unable to do so using the information reported in Table

1 for two reasons. First, it is impossible to determine whether the difference between war-time

and post-war military spending is significantly different (in and of itself and across regime type)

because the coefficients indicate the effect of a given explanatory variable on the dependent

variable compared to a baseline of the years before an interstate war. Second, the standard errors

of interaction terms reported in traditional results tables do not account for the covariance among

the constituent and interaction terms (Brambor, Clark and Golder 2006). Following King, Tomz

and Wittenberg (2000), we used a set of post-estimation simulations of the models reported in

Table 1 to test our hypotheses. Based on post-estimation simulations of Model 4, Figure 1

graphically demonstrates the predicted defense burdens (and associated confidence intervals) of

a full autocracy and a full democracy with the mean level of economic development and an ally

in the year before an interstate war, during an interstate war that lasted one year, and in the five

years following the conclusion of an interstate war.11

variance of the estimated coefficient [Ū = !

!∑!!!! 𝑈i], B is the between-imputation variance[B = !

!!!∑!!!! (Q  –  Ǭ)2],

and 1 + !!

is a correction factor to account for simulation error in Ǭ.

11 Post-estimation simulations based on Models 1-3 lead to the same inferences as the simulations reported here and are available in the supplementary appendix.

22

[Figure 1 about here]

Figure 1 is consistent with our predictions.12 Consider first the experiences of an

autocracy (red square and line). Autocracies, on average, are expected to allocate 2.7% of its

GDP to military spending in the year before an interstate war. During war-time, autocracies

dedicate 3.96% of GDP to the military. Thus, mobilization for interstate war is associated with a

47% increase in military spending in an autocracy. Autocratic defense burdens fall after the

conclusion of an interstate war. Specifically, the average autocratic defense burden is 3.44% of

GDP in the year after a war and, ultimately, 3.13% of GDP in the fifth year after an interstate

war. Defining demobilization as the difference between government spending during an

interstate war and five years after a war’s conclusion, we see that demobilization is associated

with approximately a 21% reduction in autocratic military spending.

Figure 1 clearly suggests that mobilization and demobilization is smaller in democracies

(blue diamond and line). On average, democracies are predicted to spend 1.32% of their GDP on

the military during the year before an interstate war. Mobilization for war is associated with a

19% increase in democratic military spending to 1.58% of GDP. Military spending in

democracies is predicted to increase in the years following an interstate war, although this

increase is statistically indistinguishable from zero. Democracies are expected to allocate 1.77%

of GDP to military spending in the year after a war and 1.76% five years after an interstate war’s

conclusion. We caution that Figure 1 does not allow for a direct test of whether mobilization and

demobilization are associated with statistically significant changes in autocratic and democratic

countries and whether these processes differ across regime type. Accordingly, Figure 2 plots the

12 It is worth noting that Figure 1 is also consistent with our argument and the claims of other scholars (e.g., Fordham and Walker 2005) that autocracies allocate more of their resources to military spending during times of peace than do democracies.

23

predicted autocratic and democratic mobilizations and demobilizations (Panel A) and the

difference between the two across regime type (Panel B).

A quick word about interpretation before discussing the results presented in Figure 2. The

changes in defense burden reported in Panel A and the difference across regime type in the

changes in defense burden reported in Panel B are statistically significant if the 90% confidence

interval around the expected value does not contain the zero line. We use 90% confidence

intervals because our hypotheses are directional. Panel A indicates that mobilization with

interstate war is associated with a statistically significant 1.26 percentage point increase in

autocratic defense burdens and a statistically insignificant 0.26 percentage point increase in

democratic defense burdens. In contrast, demobilization is associated with a statistically

significant 0.83 percentage point decrease in autocratic defense burdens and a statistically

insignificant 0.19 percentage point increase in democratic defense burdens. Thus, Panel A

suggests that mobilization for and demobilization from interstate war results in larger changes in

military spending in autocracies than in democracies.

Where Panel A is suggestive, Panel B in Figure 2 explicitly tests our predictions and

reports the estimated differences across regime type of military mobilization and demobilization.

As neither of the confidence intervals contains the zero-line, Panel B clearly indicates that the

degree of military mobilization and demobilization in autocracies and democracies are

statistically different from one another. Compared to democracies, autocracies increase their

defense burdens to a significantly greater degree during mobilization for war and decrease their

defense burdens to a significantly greater degree during demobilization from war. Figure 2 then

offers support for our hypotheses concerning the relationship between regime type, interstate

war, and military spending.

24

[Figure 2 about here]

It is worth briefly discussing the performance of our control variables before turning to

our analyses of regime type, interstate war, and social spending. We find no relationship between

an increase in a country’s economic development or joining an offensive or defensive alliance

and its defense burden (Models 2-4 in Table 1).13

5.2 Interstate War, Regime Type, and Social Spending

We argue that, compared to democracies, autocracies should cut social spending to a

greater degree during war-time (Hypothesis 2) and increase social spending to a greater degree

following the conclusion of an interstate war (Hypothesis 4). Our estimates of the relationship

between interstate war, regime type, and education spending are presented in Table 2. The values

reported in Table 2 are the mean values of the coefficients and corrected standard errors and

significance levels (per Rubin 1987) yielded by the estimation of five identically specified

models on each of the imputed data sets.14 As with our analyses of military spending, our use of

interaction terms and the dynamic nature of our hypotheses mean that we cannot test our

predictions using the information presented in Table 2. We therefore tested our hypotheses

regarding the relationship between interstate war, regime type, and social spending based on

post-estimation simulations of the coefficient and variance-covariance matrices of Model 8.15

The simulations were analogous to those used to test Hypotheses 1 and 3. Figure 3 presents the

13 These null results become statistically significant when estimating a pooled linear regression model (results available in supplementary appendix), suggesting that between-panel variation in economic development and alliance participation influence a country’s defense burden. 14 See Footnote 10 for the equations used to calculate the standard errors. 15 Post-estimation simulations based on Models 5-7 yielded the same inferences as reported here and are available in the supplementary appendix.

25

predicted education spending of a complete autocracy and a full democracy in the year before an

interstate war, during an interstate war that lasted one year, and in the five years after the

termination of the war.

[Figure 3 about here]

Figure 3 is consistent with our predictions.16 Focusing first on autocracies (red square

and line), we see that they dedicate 3.43% of their GDP to education spending during peace-

time. Autocracies cut education by 6% (to 3.23% of GDP), on average, during an interstate war.

As predicted, autocratic education spending increases following an interstate war. In the first

year following a war, education increases to 3.24% of GDP. By the fifth year after an interstate

war’s conclusion education spending in autocracies reaches 3.51% of GDP on average.

Democracies, in contrast, do not cut education spending during an interstate war. In the year

before a war, democracies (blue diamond and line) allocate approximately 4.45% of their GDP to

education spending. Education spending increases to 4.48% of GDP during an interstate war.

Our model then predicts an uneven decline in democratic education spending to 4.34% in the

fifth year after a war’s conclusion. Contrasting the patterns across regime type, Figure 3 suggests

that, compared to democracies, autocracies cut education spending to a greater degree during

wartime and subsequently have a larger increase in education spending following an interstate

war. Whether the changes are statistically significant and whether they vary across regime type

is investigated in Figure 4.

[Figure 4 about here]

Panel A in Figure 4 reports the predicted changes, and associated confidence intervals, in

autocratic and democratic education spending associated with mobilization for and

16 It should be noted that Figure 3 also supports our argument and the claims of other scholars (Bueno de Mesquita et al. 2003, Huber, Mustillo and Stephens 2008) that democracies should allocate more of their resources to social spending during times of peace than autocracies.

26

demobilization from war. We see that the move from peace to war is associated with a

statistically significant 0.2 percentage point reduction in autocratic education spending and a

statistically insignificant 0.02 percentage point increase in democratic education spending:

mobilization is accompanied with a significant reduction in autocratic social spending while

democracies avoid cutting social spending. The converse of this is seen during demobilization

from war. Specifically, autocratic education spending enjoys statistically significant 0.28

percentage point increase in the five years following the conclusion of an interstate war. In

contrast, demobilization is associated with a 0.13 percentage point decrease in democratic

education spending.

Panel B in Figure 4 demonstrates that mobilization for and demobilization from interstate

war have significantly different effects on autocratic and democratic education spending.

Compared to democracies, autocracies decrease education spending to a significantly greater

degree during an interstate war and increase education spending to a significantly greater degree

in the years following an interstate war. In sum, Figures 3 and 4 are consistent with Hypotheses 2

and 4 and our argument that democratic leaders should be less willing to cut social spending

during an interstate war than autocratic leaders.

Before moving on, the relationship between our control variables and social spending is

worth noting. We find that an increase in a state’s economic development or participation in an

offensive or defensive alliance is unrelated to education spending (Models 2-4 in Table 2).17

17 The null finding with respect to economic development becomes positive and statistically significant

when estimating a pooled linear regression model (results available in the supplementary appendix).

27

5.3 Robustness Checks

We conducted an extensive set of additional analyses to ensure the results reported are

robust to alternative specifications. We estimated models on data sets with missing observations;

using linear regression with panel corrected standard errors as suggested by Beck and Katz

(1995); with robust standard errors as suggested by Kristensen and Wawro (2003), with a

dichotomous measure of regime type based on the polity2 index (Marshall and Jaggers 2005);

with an alternative measure of economic development based on the Correlates of War’s indicator

of energy consumption (Singer, Bremer, and Stuckey 1972); with a count of a country’s military

alliances (Leeds et al. 2002); with a measure of interstate war participation that includes the year

before an interstate war to account for the possibility that pre-war mobilization varies across

regime type; with a measure of the war participants’ relative capabilities (Singer, Bremer, and

Stuckey 1972); with Defense Burden as an explanatory variable for Education Spending; with

Education Spending as an explanatory variable for Defense Burden; and with a dependent

variable that measures the distribution of total government spending dedicated to military and

non-military expenditures. The substantive inferences derived from these robustness checks are

consistent with the results reported here: compared to democracies, autocracies increase military

spending and decreases social spending to a greater degree during mobilization and decrease

military spending and increase social spending to a greater degree during demobilization. The

results of our robustness checks and further details about their implementation are reported in the

supplementary appendix.

6 Conclusion

28

We argue that regime type conditions the relative importance of social and military

spending in guaranteeing an incumbent’s political survival and, therefore, her willingness to

mobilize resources to wage interstate war. More specifically, the greater reliance of democratic

incumbents on the general public for their political survival provides them an incentive to limit

the increases in military spending and, perhaps more importantly, cuts in social spending during

war-time. Statistical analyses of all countries in the international system during the period from

1950 to 2001 are consistent with our predictions. We find that, compared to democracies,

autocracies increase military spending to a greater degree for an interstate war and then cut

military spending to a greater degree after a conflict ends. Our analyses also indicate that,

relative to democratic regimes, autocracies are able to cut social spending (as proxied by

education spending) to a greater extent during a war and then increase social spending to a larger

degree upon the conclusion of interstate wars.

We would like to stress four ideas here. First, our findings are consistent with our

argument that the public and elite have systematically different preferences over government

spending. Our findings highlight the relationship between the preferences of the winning

coalition and the policies the government pursues. Second, democracies not only spend more on

education and less on the military during peace-time than do non-democracies, they also alter

those allocations less than autocracies during times of war. From our perspective, this is because

democratic leaders are constrained from reducing social benefits out of concern for maintaining

their constituents’ support. The schools must be kept open even while the troops are away. This

implies, third, that the concern democratic leaders have for retaining their offices in war-time is

not exclusively a function of the war’s outcome or duration; democratic leaders evidently act to

ensure that the supply of social benefits is not excessively disrupted during war-time. Democratic

29

leaders may not lose office by losing a war but cutting social services may alienate their

constituents. Last, these findings are consistent with one answer to the question of why

democracies win such a higher proportion of their wars than do non-democracies. Specifically,

our implications are consistent with the “selection” argument that claims democratic leaders

choose their wars with greater care than do autocrats. While the standard "selection" argument

has democracies picking wars they expect to win, however, we see democratic leaders as

wanting to minimize the domestic cost of war. Engaging in wars that require resources to be

moved away from the provision of social benefits endangers a democratic leader's political

survival. Democracies, then, should be expected to avoid what are expected to be costly wars.

30

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Table 1: Regime Type, Interstate War, and Military Spending, 1950-2001

              Model  1   Model  2   Model  3   Model  4  Democracy   -­‐0.03**   -­‐0.03**   -­‐0.03**   -­‐0.03**  

 (0.01)   (0.01)   (0.01)   (0.01)  

Interstate  War   0.78**   0.77**   0.77**   0.76**  

 (0.18)   (0.19)   (0.18)   (0.19)  

Interstate  War  *  Democracy   -­‐0.05*   -­‐0.05*   -­‐0.05*   -­‐0.05*  

 (0.02)   (0.02)   (0.02)   (0.02)  

Post-­‐War   -­‐0.09   -­‐0.11   -­‐0.11   -­‐0.11  

 (0.29)   (0.29)   (0.29)   (0.29)  

Post-­‐War  *  Democracy   0.03   0.03   0.03   0.03  

 (0.03)   (0.03)   (0.03)   (0.03)  

Economic  Development     -­‐6.97E-­‐06    

-­‐6.41E-­‐06  

    (1.19E-­‐05)  

 (1.20E-­‐05)  

Alliance      

0.15   0.15  

   

 (0.12)   (0.12)  

Military  Spending  t-­‐1   0.72**   0.72**   0.72**   0.72**  

 (0.05)   (0.05)   (0.05)   (0.05)  

Constant   0.67**   0.72**   0.58**   0.62**  

 (0.13)   (0.14)   (0.13)   (0.14)  

                   Overall  R2   0.73   0.73   0.73   0.73  χ2   1510.24   1294.59   1294.98   1133.17  p  >  χ2   <0.01   <0.01   <0.01   <0.01  Observations   7406   7406   7406   7406  Temporal  Domain:  1950-­‐2001  

     Two-­‐tailed  Significance  Tests:  †:    p  ≤  0.1;  *  :    p  ≤  0.05;  **  :    p  ≤  0.01    Standard  Errors  in  Parentheses  

               

38

Table 2: Regime Type, Interstate War, and Social Spending, 1970-1999

              Model  1   Model  2   Model  3   Model  4  Democracy   0.001   0.001   0.001   0.001  

 (0.002)   (0.002)   (0.002)   (0.002)  

Interstate  War   -­‐0.09†   -­‐0.09†   -­‐0.09†   -­‐0.09†  

 (0.05)   (0.05)   (0.05)   (0.05)  

Interstate  War  *  Democracy   0.01*   0.01*   0.01*   0.01*  

 (0.01)   (0.01)   (0.01)   (0.01)  

Post-­‐War   -­‐0.03   -­‐0.02   -­‐0.02   -­‐0.02  

 (0.07)   (0.07)   (0.07)   (0.07)  

Post-­‐War  *  Democracy   -­‐0.001   -­‐0.001   -­‐0.001   -­‐0.001  

 (0.01)   (0.01)   (0.01)   (0.01)  

Economic  Development     2.63E-­‐06     2.47E-­‐06  

    (4.87E-­‐06)     (4.85E-­‐06)  

Alliance       -­‐0.04   -­‐0.04  

      (0.03)   (0.03)  

Education  Spending  t-­‐1   0.93**   0.93**   0.93**   0.93**  

 (0.01)   (0.01)   (0.01)   (0.01)  

Constant   0.28**   0.26**   0.30**   0.29**  

 (0.03)   (0.05)   (0.03)   (0.04)  

                   Overall  R2   0.94   0.94   0.94   0.94  

χ2   3990.97   4559.17   4559.50   3990.97  p  >  χ2   <0.01   <0.01   <0.01   <0.01  Observations   4895   4895   4895   4895  Temporal  Domain:  1970-­‐1999  

     Two-­‐tailed  Significance  Tests:  †:    p  ≤  0.1;  *  :    p  ≤  0.05;  **  :    p  ≤  0.01    Standard  Errors  in  Parentheses  

               

39

Figure 1: Regime Type, Interstate War, and Military Spending

40

Figure 2: Regime Type and the Mobilization and Demobilization of Military Spending

41

Figure 3: Regime Type, Interstate War, and Education Spending

42

Figure 4: Regime Type and the Mobilization and Demobilization of Education Spending