# **II. Public Spending and Conflict**

Research points out the importance of government spending in preventing violent conflict. This work emphasizes specific types of spending including (1) general government spending, (2) military spending or (3) social spending such as education, health and social security.

# **_General spending_**

High levels of government expenditures could signal that the political leadership is willing to use its resources to reward its supporters, rather than spending them for personal enrichment. A strategic allocation of state patronage, in the form of government construction contracts, public employment, or economic transfers, might buy support for the government from powerful segments of the population and placate restive groups (Bratton and Van de Walle, 1997; Acemoglu et al., 2004). Fjelde and de Soysa (2009) provide evidence indicating that higher government expenditure enables governments to buy off effectively opposition and increase the welfare of marginalized groups.<sup>9</sup> This has the potential to increase the status-quo stakes of key social actors, as well as reduce grievance and inequity, thus reducing the appeal of violent challenges to power from both elites and the broader population.

In oil-rich countries, the signaling function and public nature of spending commitments could be even more important than in oil-poor countries. Because oil resources are non-tax revenue, it is generally difficult for citizens and rebels to figure out how much oil resources the government actually has and how much the ruling elites can siphon out from the public coffers (Ross, 2012). In this context, rebels may overestimate the value of the state. Signaling via large-scale provision of public goods could thus lower the rebels’ perception about the value of the state as a prize going to small elites and their expectations that they will be able to grab a high state prize pending successful insurgency. This should result in fewer incentives to take up arms, and more readiness to cooperate with the government.

# **_Military spending_**

Collier, Hoeffler and Rohner (2009) argue that the financial and military feasibility (and thus the coercive and administration capacity of a state) play an important role in explaining the occurrence or not of rebellion. Weak states (i.e. ones that do not have sufficient bureaucratic presence across their national territory, police, and military forces) will face difficulties in enforcing laws, imposing order, and maintaining peace. Similarly, Fearon and Laitin (2003)

> 9 Hypotheses are tested for 141 countries, 1965 - 2006. The onset of violent conflict is measured using the UCDP/PRIO armed conflict dataset, with both the 25 casualties and the 1000 death toll threshold to define conflict onset. Government expenditure as percent of GDP (World Development Indicators) excludes government military expenditures that are part of government capital formation. Statistical results consistently and statistically significant show that countries with large government expenditure ratios to GDP are less likely to experience violent conflict. Thies (2010), however, uses an instrumental variable approach and finds no effect between the share of government spending and large civil wars (1000 death toll threshold).

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