The Impact of Oil Rents on Military Spending in the GCC Region: Does Corruption Matter?

Abstract

Abstract This study shows how the level of corruption matters in the way oil rents affect a state's military spending. Using panel data covering the 1984–2014 period for the Gulf Cooperation Countries (GCC), we find that the effect of oil rents on military budgets depends on the extent of political corruption. Oil rents are negatively associated with military spending of the GCC countries. However this, in turn, is moderated by higher levels of corruption. For comparison, we examine this association in non-GCC countries in the MENA region, finding a positive effect of higher oil rents on military spending: this effect is larger in corrupt polities within non-GCC countries. The intermediary role of corruption in the military-oil nexus is robust, controlling for a set of variables that may affect military spending.