ABSTRACT
Using panel data for MENA countries from 1987 to 2012, the model estimates the relation between military spending and natural resources:
Milexit ¼ Bo þ B1GDPGit�1 þ B2GDPPcapitit � 1þ B3Coalit�1 þ B4Forestit�1 þ B5Mineralit�1 þ B6NaturalGit�1 þ B7Oilit�1 þ B8conflictit þ vi þ øt þ it
Where: country (i), time (t), military expenditure (Milexit), GDP annual growth rate (GDPG), GDP per capita in constant 2000 US$ (GDPPcapit), coal rents as percent of GDP (Coal), forest rents as percent of GDP (Forest), mineral rents as percent of GDP (Mineral), natural gas rents as percent of GDP (NaturalG), oil rents as percent of GDP (Oil), the country effect (ν), the time effect (Ø), and the error term (ɛ). We attempt to predict the the impact of GDP growth and per capita income on military
expenditure. In the case of MENA countries, military expenditure is independent of GDP growth; as a country becomes wealther, it allocates less to the military across the models, as shown in TABLE III. However, the countries’ rent from forests contributes to a rise in military spending, and it is highly significant across the models. For example, 1% increase in forest earnings increases military spending in the range of 2.5 to 3.2%. Increases in oil rent also result in increases in military spending in the range of 0.05 to 0.07%. The impact of natural gas rent on military spending is ambiguous, with negative signs in models 3-5. However, when we introduced the interaction variable of GDP per capita and natural gas earnings, the variable become significant and the sign did not change. The rent from coal has a significant negative effect on military spending, except in model 1. The oil and forest rents contribute positively to military spending in MENA countries; conversely, the rents from coal and natural gas depress military spending to some extent. It might be that the countries with long-term contracts to sell oil and forest resources need to acquire military protection for the resources. The countries with natural gas also have oil, so these two variables act as substitutes when it comes to budgetary spending, with the government using either the oil or the natural gas receipts. It is more likely, however, that the countries rely on oil to finance their miltary spending: because the oil importers are also arms suppliers, it becomes feasible to swap oil for guns. Surprisingly, the conflict variable in MENA has no impact on military spending. This is
from 1988 to 2012, conflict became embedded into everyday life,
DEFENSE SPENDING, NATURAL RESOURCES, AND CONFLICT
