Estimating the value of investments in militaristic deterrence

This paper is the first to offer a unified analysis of the economic benefit of militaristic deterrence. Deterrence is understood to be the prevention of action by the existence of a credible threat of unacceptable counteraction. In the current era of Great Power Competition (GPC), deterrence requires the development of military capacity (often times, nuclear weapons) and/or international alliance building to produce the capability of overwhelming destruction in response to a militaristic threat. Using post-Cold War NATO enlargement as our primary empirical case study, we find that countries joining nuclear-capable alliances experience substantial economic benefits. We complement this analysis with a case study of Pakistan’s nuclear weapons development. Our results suggest that the establishment of credible deterrence may allow a country to avoid conflict and prioritize economically productive areas of society. We estimate that, relative to the counterfactual, successful deterrence of future (potential) large-scale conflict with adversarial nations is associated with a 1.2%–1.7% increase in annual per capita growth.