Economic Development in Latin America, 1801-2015: Did the 19th Century Wars Foil Expansion of Education?

Using data from seven Latin American countries for over the past two centuries, this article studies the role of military expenditure on crowding out education that effected development of human capital and R&D. 19 century Latin America was characterized by continuous wars and conflicts and a big percentage of public spending was devoted to military spending. Based on the demand side crowding out theory, this study found a negative relationship for military expenditure with human capital and R&D. Our findings are robust to different identification strategies and estimations. We further analyse why Latin America challenged the paradigm of “wars making states hypothesis” and establish that the underlying factor for failure to state building and economic development is the high levels land inequality existing from the colonial times in the region.