Military Spending, the Peace Dividend, and Fiscal Adjustment

Changes in international relations and the end of the Cold War continue to stimulate economic research on the determinants of military spending as well as on the relationship between military spending, other public sector outlays, and private consumption. Perceived or actual reductions in international tensions associated with the end of the Cold War have led to discussions regarding the magnitude of the "peace dividend" and its use (Gleditsch and others, 1996; Clements, Gupta and...
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Changes in international relations and the end of the Cold War continue to stimulate economic research on the determinants of military spending as well as on the relationship between military spending, other public sector outlays, and private consumption. Perceived or actual reductions in international tensions associated with the end of the Cold War have led to discussions regarding the magnitude of the "peace dividend" and its use (Gleditsch and others, 1996; Clements, Gupta and Schiff, 1997; Schiff, Gupta, and Clements, 1998; and Rockoff, 1998). At the same time, the need for fiscal adjustment in many countries has led to an increasing focus on unproductive spending in general, including excessive military spending (Chu and others, 1995; and IMF, 1997).