Abstract: One of the most striking institutional differences across countries is the extent to which their militaries intervene in politics. This article examines the role of war in generating these differences. It presents a model that shows that when governance institutions are weak, increasing military spending makes a country more likely to win in a war and increases the probability that coups succeed. An incumbent can avoid coups by strengthening governance institutions, but this limits the rents he can extract. Both the optimal choice of military spending and the strength of governance institutions depend on the probability of war. The article predicts a non-monotonic relationship between the frequency of wars and coups and presents empirical evidence consistent with this prediction.