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Demand for military spending in NATO, 1968–2015: A spatial panel approach

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  • George, Justin
  • Sandler, Todd

Abstract

This paper presents two-step GMM panel estimates of NATO allies' demand for defense spending during 1968–2015, 1991–2015, and 1999–2015. A novel feature of our NATO estimates is the spatial autoregressive (SAR) weighting of alliance spillovers of defense spending based on ally contiguity (augmented by US defense spending) and inverse distance between allies. The spatial models provide defense demand estimates that are amazingly consistent with those of the standard spillover model. In particular, free riding is prevalent in all three sets of estimates for the three sample periods and changing set of allies. In addition, the influences of the controls are generally robust, including the effect of the change in strategic doctrine in 1975 that augmented the importance of conventional weapons and, thus, spatial factors. We also present mutual assured destruction (MAD) era defense demand estimations dating back to 1960 and 1950 to show that spatial-based spillovers only matter in the post-MAD era after 1974.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:poleco:v:53:y:2018:i:c:p:222-236
    DOI: 10.1016/j.ejpoleco.2017.09.002
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    Cited by:

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    3. Johannes Blum, 2020. "Democracy’s Third Wave and National Defense Spending," ifo Working Paper Series 339, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    4. Johannes Blum & Niklas Potrafke, 2019. "International Agreements and Changes of Government: Evidence on NATO’s Two Percent Target," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 72(03), pages 18-21, February.
    5. Blum, Johannes, 2019. "Arms production, national defense spending and arms trade: Examining supply and demand," European Journal of Political Economy, Elsevier, vol. 60(C).
    6. Yang Wang & Chengchao Zuo & Mengke Zhu, 2024. "How Semi-Urbanisation Drives Expansion of Rural Construction Land in China: A Rural-Urban Interaction Perspective," Land, MDPI, vol. 13(1), pages 1-17, January.
    7. Johannes Blum, 2019. "Arms Production, National Defense Spending and Arms Trade: Examining Supply and Demand," ifo Working Paper Series 310, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    8. Johannes Blum & Niklas Potrafke, 2020. "Does a Change of Government Influence Compliance with International Agreements? Empirical Evidence for the NATO Two Percent Target," Defence and Peace Economics, Taylor & Francis Journals, vol. 31(7), pages 743-761, October.

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    More about this item

    Keywords

    D74; H41; NATO defense demand; Spatial autoregression; Strategic doctrine; Free riding; Ally propinquity;
    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

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