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

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

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 (augme...

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Bibliographic Details
Published in:European Journal of Political Economy 2018-07, Vol.53, p.222-236
Main Authors: George, Justin, Sandler, Todd
Format: Article
Language:eng
Subjects:
Alliances
Ally propinquity
Augmentation
D74
Defense spending
Free riding
H41
International organizations
NATO defense demand
Political economy
Regression analysis
Spatial autoregression
Strategic doctrine
Strategic planning
Weapons
Weighting
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Summary: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. •We present the first spatial-based defense demands for NATO allies.•Free riding is prevalent for alternative spatial-based demand estimates after 1967.•Spatial spillovers are shown not to matter when NATO relied on nuclear weapons to deter aggression.•NATO post-1998 entrants are not responding to the threat posed by Russian military expenditures.•Transnational terrorist attacks against allies influence their defense spending after 1991.
ISSN:0176-2680
1873-5703