Military versus non-military government spending and the shadow economy

•This research examines cross-national determinants of the shadow economy.•The focus is on the relative effects of military and non-military government spending.•Nations with larger military spending are shown to have smaller shadow economies.•The effect of non-military government spending is statistically insignificant.•These findings stand up to robustness checks.

Using recent cross-national data, this research examines the determinants of the shadow economy, focusing on the relative effects of military and non-military government spending. Results show that, other things being the same, nations with larger military spending have smaller shadow economies, while the effect of non-military government spending is statistically insignificant. These findings stand up to various robustness checks.