Military Technology, Defense Spending and Modernization of the Armed Forces: The Case of Spain, 1891-1935

Abstract

A central aspect of the modernization of the armed forces is innovation in military technology, which in turn has been closely linked to defense spending. However, the connection between these variables has hardly been analyzed quantitatively. This is due, in part, to the scarcity of statistical data on military technology. This paper has constructed this indicator for the case of Spain based on patents registered in the country. This has allowed us to conduct a VAR model analysis to explore the relationship between defense spending and military technology and between the latter and the modernization of the armed forces from the late 19th century to the eve of the Civil War. Estimates have revealed that defense spending did not have a causal effect (in the Granger sense) on military patents, but there was a relationship in the opposite direction; that is, technological innovation preceded spending. In addition, it has been found that the patents that most influenced spending were foreign patents. On the other hand, there is evidence of a positive effect of military patents on the modernization of the armed forces, with foreign patents being the most influential in this case as well.