Dimensions of democracy and military expenditure

Is democracy a luxury that nations cannot afford during wartime? Focusing on the dimensions of democracy separately, I argue that two main features of democracy, contestation and inclusiveness, pull war effort decisions in opposite directions. While decreasing contestation increases the available discretionary resources to leaders and generates long-term reputational incentives to fund a war effort, the inclusiveness dimension determines leaders’ ability to maintain their support base at different levels of a war effort. Predictions from this new theory are tested with a panel dataset that covers all the state-years between 1950 and 2000. Statistical analyses confirm the implications of the theory.