Natural Resource Exploitation and Military Spending

Why do some states allocate more resources to their military than others? Governments are likely to perceive acute threats to their authority and legitimacy when they face insurgencies in which rebel groups earn significant revenues from the exploitation of natural resources. In response, governments allocate greater amounts to their military budgets. Using data on the exploitation of natural resources by rebel groups and defense spending for states around the world, I find that states where rebel groups profit from natural resources allocate more to their defense budgets than other states. This finding holds even after controlling for the presence of civil conflict itself. The study suggests that rebel exploitation of resources may have an indirect impact on interstate relations: If states indeed face a security dilemma, then increased spending resulting from these internal dynamics is likely to exacerbate the problem.