A tale of five stories: Defence spending and economic growth in NATO´s countries.

Paula Gómez-Trueba Santamaría,Alfredo Arahuetes García,Tomás Curto González,Isabel Novo-Cortí

doi:10.1371/journal.pone.0245260

Paula Gómez-Trueba Santamaría, Alfredo Arahuetes García + Show 2 more

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https://doi.org/10.1371/journal.pone.0245260

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Abstract

This article examines the relationship between defence expenditure and its impact on the growth of NATO’s countries between 2005 and 2018. The aim is to determine if this relation exists and to test if it is possible to discover different models across the countries. The results obtained using the Arellano–Bond estimator, suggest that there is more than one model, and confirm, through the poolability test, the existence of five different groups of countries within the Alliance, with different impacts of the defence expenditure on their gross domestic product. These findings are in line with the review of existing literature that reveals heterogeneity in the results due to different parameters used.

Highlights

In the US 2016 electoral process, President Donald Trump already affirmed that the NATO was an obsolete institution, even considering it a relic of the Cold War, noting that “were dealing with NATO from days of the Soviet Union, which no longer exist (. . .)” [1]
In view of the very varied results obtained in the mentioned literature, and the analysis of the academic discussion that exist, this article aims to contribute to the literature through the study of the impact of defence expenditure on the growth of the NATO’s countries between 2005 and 2018, in order to determine what type of causality exists between both variables
Numerous authors have studied the effect of defence expenditure on the economy growth

Summary

Introduction

In the US 2016 electoral process, President Donald Trump already affirmed that the NATO was an obsolete institution, even considering it a relic of the Cold War, noting that “were dealing with NATO from days of the Soviet Union, which no longer exist (. . .)” [1]. He has called for the need for changes in NATO’s fields of action, such as terrorism, without acknowledging the Alliance’s support for the US military in the Middle East Above all, he has made the defence spending the main point of his claims to the NATO countries, pointing out that the existence of an asymmetry between the US military spending and that of the rest of the NATO members, threatening to withdraw troops and funds given that the lack of commitment of the Allies in terms of funding and modernization. The increase in the scale of tension, in different fronts, with Russia determined that, in recent years, the USA increased again their military presence in Europe with more troops and equipment, more investment in infrastructure and more exercises For their part, the European Allies countries are more convinced than ever of the importance of their commitment to NATO, and after years of reducing defence spending, all of them and Canada are investing significantly more in defence.

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