This paper examines how negative shocks to arms imports due to external arms embargoes affect the military expenditure, quality of democracy and internal and external conflicts in a sample of 48 mainly developing countries for the period of 1990–2017. An important innovation is that we include both political and conflict factors in a Panel Vector Autoregressive (PVAR) model of arms sanctions. The results show that the responses of political system and different indices of democracy including electoral, liberal, participatory, deliberative, and egalitarian democracy to decreases in arms imports (as a percentage of GDP) are positive and statistically significant, and that of military expenditures (as a percentage of GDP) is negative and significant. Furthermore, our findings show that while arms restrictions do not significantly impact on religious tensions and external conflicts, they may intensify ethnic tensions and internal conflicts in developing countries. Overall the results indicate that arms embargo weakens the military sector by creating the negative impact on military expenditure and the size of armed forces and destabilizes the government. Although this improves democratic characteristics in developing countries, it may lead to higher ethnic tensions and internal conflict. In contrast to military expenditures, the responses of education expenditures, health expenditures and GDP per capita to negative shocks in arms imports are positive. The overall results are robust to different definitions of arms shocks, and different indicators of political institutions (V-DEM democracy indices and polity2), as well as differing orderings of variables in the panel VAR system.

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International Institute of Social Studies of Erasmus University (ISS)
ISS Working Papers - General Series
ISS Working Paper Series / General Series
International Institute of Social Studies of Erasmus University (ISS)

Dizaji, S.F, & Murshed, S.M. (2020). The impact of external arms restrictions on democracy and conflict in developing countries. ISS Working Paper Series / General Series (Vol. 661). International Institute of Social Studies of Erasmus University (ISS). Retrieved from