Shock and Awe: Economic Sanctions and Relative Military Spending

Economic sanctions can be used to shock and awe target countries, forcing them to either concede or undertake tough guns-versus-butter trade-offs. While existing studies have shown that sanctioned countries reduce their military spending in absolute terms, it is not clear whether target states really trade guns for butter. We argue that in the short run channeling proportionally more resources to the military can both signal target countries' resolve not to back down and consolidate their domestic political power. This short-term incentive to boost relative military spending is further moderated by target countries' economic integration into global trade networks. Countries that are better integrated face less pressure to spend; less integrated countries, by contrast, have stronger incentives to invest in the military while they can. Relying on a new measurement of sanction shocks and applying dynamic panel modeling to examine the military spending of 166 countries from 1962 to 2015, we find strong support for our theoretical expectations.