IDEAS home Printed from https://ideas.repec.org/a/spr/empeco/v63y2022i3d10.1007_s00181-021-02179-0.html
   My bibliography  Save this article

Identifying the public goods allocation process: case of the North Atlantic Treaty Organization

Author

Listed:
  • Minoru Okamura

    (Aoyama Gakuin University)

Abstract

This study first presents Nash–Cournot and Lindahl models predicated on the demand system to test whether the public goods allocation process is Nash–Cournot or Lindahl in the case of North Atlantic Treaty Organization (NATO) allies. The Pesaran–Deaton non-nested test is used. The results indicate that neither of these is supported in any NATO allies but the USA, and that the Nash–Cournot allocation process is supported only in the USA. Second, this study tests the relative explanatory power of these two models using the Vuong non-nested test. This test is useful when neither allocation process is supported. Testing results indicate that in small allies, the Nash–Cournot model has better explanatory power than the Lindahl model, whereas in large allies, the two models either have equivalent explanatory power or the Nash–Cournot model has worse explanatory power than the Lindahl model.

Suggested Citation

  • Minoru Okamura, 2022. "Identifying the public goods allocation process: case of the North Atlantic Treaty Organization," Empirical Economics, Springer, vol. 63(3), pages 1707-1726, September.
    • Handle: RePEc:spr:empeco:v:63:y:2022:i:3:d:10.1007_s00181-021-02179-0
    DOI: 10.1007/s00181-021-02179-0
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s00181-021-02179-0
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s00181-021-02179-0?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Minoru Okamura, 2000. "Simultaneous provision of defense and aid: Empirical evidence from the united states-Japan alliance," Defence and Peace Economics, Taylor & Francis Journals, vol. 11(1), pages 73-91.
    2. Pesaran, M H & Deaton, Angus S, 1978. "Testing Non-Nested Nonlinear Regression Models," Econometrica, Econometric Society, vol. 46(3), pages 677-694, May.
    3. Jyoti Khanna & Todd Sandler & Hirofumi Shimizu, 1999. "The Demand for UN Peacekeeping, 1975–1996," Kyklos, Wiley Blackwell, vol. 52(3), pages 345-368, August.
    4. Raechelle Mascarenhas & Todd Sandler, 2006. "Do donors cooperatively fund foreign aid?," The Review of International Organizations, Springer, vol. 1(4), pages 337-357, December.
    5. Khanna, Jyoti & Sandler, Todd & Shimizu, Hirofumi, 1999. "The Demand for UN Peacekeeping, 1975-1996," Kyklos, Wiley Blackwell, vol. 52(3), pages 345-368.
    6. Oneal, John R., 1990. "The theory of collective action and burden sharing in NATO," International Organization, Cambridge University Press, vol. 44(3), pages 379-402, July.
    7. Todd Sandler & James C. Murdoch, 1990. "Nash-Cournot or Lindahl Behavior?: An Empirical Test for the NATO Allies," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(4), pages 875-894.
    8. Murdoch, James C. & Sandler, Todd, 1984. "Complementarity, free riding, and the military expenditures of NATO allies," Journal of Public Economics, Elsevier, vol. 25(1-2), pages 83-101, November.
    9. Todd Sandler, 1993. "The Economic Theory of Alliances," Journal of Conflict Resolution, Peace Science Society (International), vol. 37(3), pages 446-483, September.
    10. Murdoch, James C. & Sandler, Todd, 1997. "The voluntary provision of a pure public good: The case of reduced CFC emissions and the Montreal Protocol," Journal of Public Economics, Elsevier, vol. 63(3), pages 331-349, February.
    11. Vuong, Quang H, 1989. "Likelihood Ratio Tests for Model Selection and Non-nested Hypotheses," Econometrica, Econometric Society, vol. 57(2), pages 307-333, March.
    12. Okamura, Minoru, 1991. "Estimating the Impact of the Soviet Union's Threat on the United States-Japan Alliance: A Demand System Approach," The Review of Economics and Statistics, MIT Press, vol. 73(2), pages 200-207, May.
    13. Bergstrom, Theodore & Blume, Lawrence & Varian, Hal, 1986. "On the private provision of public goods," Journal of Public Economics, Elsevier, vol. 29(1), pages 25-49, February.
    14. Okamura, Minora, 1996. "The Welfare Effects of Disarmament on the United States under NATO and the Warsaw Pact," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 277-285, May.
    15. Dmitri Steinberg, 1992. "The Soviet defence burden: Estimating hidden defence costs," Europe-Asia Studies, Taylor & Francis Journals, vol. 44(2), pages 237-263.
    16. Martin C. McGuire & Carl H. Groth, 1985. "A Method for Identifying the Public Good Allocation Process Within a Group," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(Supplemen), pages 915-934.
    17. Khanna, Jyoti, 1993. "Cooperative versus Noncooperative Behavior: The Case of Agricultural Research," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 346-352, May.
    18. Murdoch, James C & Sandler, Todd, 1986. " The Political Economy of Scandinavian Neutrality," Scandinavian Journal of Economics, Wiley Blackwell, vol. 88(4), pages 583-603.
    19. Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Todd Sandler, 1993. "The Economic Theory of Alliances," Journal of Conflict Resolution, Peace Science Society (International), vol. 37(3), pages 446-483, September.
    2. Keith Hartley & Todd Sandler, 2001. "Economics of Alliances: The Lessons for Collective Action," Journal of Economic Literature, American Economic Association, vol. 39(3), pages 869-896, September.
    3. William Gates & Katsuaki Terasawa, 2003. "Reconsidering publicness in alliance defence expenditures: NATO expansion and burden sharing," Defence and Peace Economics, Taylor & Francis Journals, vol. 14(5), pages 369-383.
    4. Steven D. Roper & Lilian A. Barria, 2010. "Burden Sharing in the Funding of the UNHCR: Refugee Protection as an Impure Public Good," Journal of Conflict Resolution, Peace Science Society (International), vol. 54(4), pages 616-637, August.
    5. Bruce Linster & Richard Fullerton & Michael Mckee & Stephen Slate, 2001. "Rent-seeking models of international competition: An experimental investigation," Defence and Peace Economics, Taylor & Francis Journals, vol. 12(4), pages 285-302.
    6. Brunner, Eric & Sonstelie, Jon, 2003. "School finance reform and voluntary fiscal federalism," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 2157-2185, September.
    7. Conybeare, John A C & Murdoch, James C & Sandler, Todd, 1994. "Alternative Collective-Goods Models of Military Alliances: Theory and Empirics," Economic Inquiry, Western Economic Association International, vol. 32(4), pages 525-542, October.
    8. Young‐Wan Goo & Seung‐Nyeon Kim, 2012. "Time-Varying Characteristics Of South Korea-United States And Japan-United States Military Alliances Under Chinese Threat: A Public Good Approach," Defence and Peace Economics, Taylor & Francis Journals, vol. 23(1), pages 95-106, February.
    9. Kyle, Margaret K. & Ridley, David B. & Zhang, Su, 2017. "Strategic interaction among governments in the provision of a global public good," Journal of Public Economics, Elsevier, vol. 156(C), pages 185-199.
    10. Snyder, Susan K., 1999. "Testable restrictions of Pareto optimal public good provision," Journal of Public Economics, Elsevier, vol. 71(1), pages 97-119, January.
    11. George, Justin & Sandler, Todd, 2018. "Demand for military spending in NATO, 1968–2015: A spatial panel approach," European Journal of Political Economy, Elsevier, vol. 53(C), pages 222-236.
    12. Goo, Young-Wan & Lee, Seong-Hoon, 2014. "Military Alliances and Reality of Regional Integration: Japan, South Korea, the US vs. China, North Korea," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 29, pages 329-342.
    13. Glenn Palmer & J. Sky David, 1999. "Multiple Goals or Deterrence," Journal of Conflict Resolution, Peace Science Society (International), vol. 43(6), pages 748-770, December.
    14. 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.
    15. Hansen, Laurna Jane, 1988. "Conventional versus strategic expenditures in NATO: a public goods approach," ISU General Staff Papers 1988010108000017600, Iowa State University, Department of Economics.
    16. John R. Oneal, 1990. "Testing the Theory of Collective Action," Journal of Conflict Resolution, Peace Science Society (International), vol. 34(3), pages 426-448, September.
    17. Wang, Qingbin, 1994. "Modeling China's household food demand in the transition toward a market economy," ISU General Staff Papers 1994010108000011518, Iowa State University, Department of Economics.
    18. Weber, Shlomo & Weber, Yuval & Wiesmeth, Hans, 2019. "Hierarchy of Membership and Burden Sharing in a Military Alliance," CEPR Discussion Papers 13965, C.E.P.R. Discussion Papers.
    19. Silva João M. C. Santos & Tenreyro Silvana & Windmeijer Frank, 2015. "Testing Competing Models for Non-negative Data with Many Zeros," Journal of Econometric Methods, De Gruyter, vol. 4(1), pages 1-18, January.
    20. Thomas Plümper & Eric Neumayer, 2015. "Free-riding in alliances: Testing an old theory with a new method," Conflict Management and Peace Science, Peace Science Society (International), vol. 32(3), pages 247-268, July.

    More about this item

    Keywords

    Nash–Cournot; Lindahl; Non-nested test; Demand system;
    All these keywords.

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:empeco:v:63:y:2022:i:3:d:10.1007_s00181-021-02179-0. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.