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EU Demand for Defense, 1990–2019: A Strategic Spatial Approach

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  • Justin George

    (Department of Agricultural, Food, and Resource Economics, Michigan State University, 426 Auditorium Road, East Lansing, MI 48824, USA)

  • Todd Sandler

    (School of Economic, Political and Policy Sciences, University of Texas at Dallas, 800 W Campbell Rd, Richardson, TX 75080, USA)

Abstract

For 1990–2019, this study presents two-step GMM estimates of EU members’ demands for defense spending based on alternative spatial-weight matrices. In particular, EU spatial connectivity is tied to EU membership status, members’ contiguity, contiguity and power projection, inverse distance, and arms trade. At a Nash equilibrium, our EU demand equations are derived explicitly from a spatially based game-theoretical model of alliances. Myriad spatial linkages among EU members provide a robust free-riding finding, which differs from the spatial and non-spatial literature on EU defense spending. Even though the EU applies common trade policies and allows for unrestricted labor movement among members, members’ defense responses adhered to those of a defense alliance. Moreover, EU defense spending exhibits positive responses to GDP and transnational terrorist attacks, and a negative response to population. During the sample period, EU members did not view Russia as a military threat.

Suggested Citation

  • Justin George & Todd Sandler, 2021. "EU Demand for Defense, 1990–2019: A Strategic Spatial Approach," Games, MDPI, vol. 12(1), pages 1-18, February.
    • Handle: RePEc:gam:jgames:v:12:y:2021:i:1:p:13-:d:490811
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    References listed on IDEAS

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    3. Justin George & Todd Sandler, 2022. "NATO defense demand, free riding, and the Russo-Ukrainian war in 2022," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 49(4), pages 783-806, December.

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