Models of military expenditure

A brief review of the extensive empirical literature devoted to explaining levels of military expenditure indicates a wide variety of unreconciled results. However, comparing the alternative models is not straightforward. This paper uses British post-war military expenditures to illustrate some of the methodological issues involved in model comparison, evaluation and selection. Starting from two published models for the UK, a systematic specification search leads to a new model, which dominates alternative specifications, passes a wide range of misspecification tests, and also fits well to French data.