International Comparisons of Real Military Purchasing Power: A Global Database

The absence of military purchasing power parity exchange rates severely limits the accuracy of international comparisons of military spending. I use new techniques, to construct a database of defense sector purchasing-power-parity exchange rates for 59 countries, covering 86% of world military spending, over nearly two decades. The results show that when defense-sector price differences are taken into account, the real defense budgets of countries such as Russia and China and India, are much larger than conventionally thought and that the USA’s military budget occupies a much smaller share of world spending. The results have important implications for standard international comparisons of military spending that rely on market exchange rates or conventional purchasing power parity exchange rates.