Corruption and Public Expenditure : Does corruption divert public spending from social to military sector?

Sammanfattning: Corruption, militarism, and conflict are bedfellows, and their coexistence feeds a vicious circle of violence and instability. Every dollar spent on the military is a dollar not spent on welfare-generating services such as education and healthcare. Yet, military spending makes up a bulk of government spending in several countries, and it is often shrouded from public purview. Rent-seeking behavior fostered within corrupt practices incentivize public officials to accept bribes from military suppliers, while the secrecy surrounding defense procurements allows them to act with perceived impunity. In this paper, I conduct a quantitative study using panel data from 175 countries from 2000 to 2020 to argue that corruption causes a distortion in public expenditure distribution by diverting valuable resources from social spending to military spending. Highly corrupt countries tend to spend a higher percentage of their GDP on the military, freeing up less of the finite resources for investment in education and healthcare. I find that corruption drives up military spending causing a crowding out of social spending.