LAUSR

Abstract This study examines the relationship between natural resources rents and military expenditure in a global sample of 163 economies over the period 1996–2017. Integrating and extending existing perspectives on rentier state theory, we show that the impact of natural resource rents on military expenditure is best captured by an inverse U-shape. This result holds when we control for the effects of other determinants of military expenditure, time varying common shocks, and country fixed effects. In addition, the effect is particularly pronounced in Middle East and North Africa and Sub-Saharan Africa regions. We further observe that the inverse U-shaped relationship varies with the level of countries’ government effectiveness. Overall, our findings imply that resource-dependent countries use revenue from abundant resources to pacify opposition groups and buy off peace, thereby positively contributing to political stability.