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Unintended Consequences: Does Aid Promote Arms Races?

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  • Paul Collier
  • Anke Hoeffler

Abstract

Using global data for the period 1960–99, we model military expenditure. Neighbours’ military spending and development aid are important determinants of military expenditure. An implication of the model is that there are regional arms races which are fuelled by aid. Potentially, aid is encouraging a ‘regional public bad’. There may, however, be an offsetting public good effect if military spending deters rebellions. In a simultaneous equation model, we find no deterrence effect of spending on the risk of civil war. Hence, there appears to be no regional public good effect offsetting the public bad arising from a neighbourhood arms race.

Suggested Citation

  • Paul Collier & Anke Hoeffler, 2007. "Unintended Consequences: Does Aid Promote Arms Races?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 69(1), pages 1-27, February.
    • Handle: RePEc:bla:obuest:v:69:y:2007:i:1:p:1-27
    DOI: 10.1111/j.1468-0084.2006.00439.x
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    References listed on IDEAS

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    1. World Bank, 2002. "World Development Indicators 2002," World Bank Publications - Books, The World Bank Group, number 13921.
    2. Paul Collier & V. L. Elliott & Håvard Hegre & Anke Hoeffler & Marta Reynal-Querol & Nicholas Sambanis, 2003. "Breaking the Conflict Trap : Civil War and Development Policy," World Bank Publications - Books, The World Bank Group, number 13938.
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