Beyond burden-sharing: Signaling and variation in NATO defence spending

Changes in the security environment after the Cold War and decreasing number of armed conflicts in NATO member states lead these countries to a gradual reduction in military expenditure. However, new security threats that these countries faced at the beginning of the 21st century brought a massive growth of military expenditure especially in the USA which lead to significant deepening of disparities between the USA and European NATO member states. The aim of the article is to investigate disproportionality of burden sharing among 28 NATO members and via multidimensional statistic methods identify free-riding in Alliances. A model based on theory of the demand for military spending provides the basis for an investigation of the disparities (identified especially in the characteristics of the economic and security environment) in determinants influencing military expenditure. Finding suggest that the Alliance is not mainly an economically homogenous body and individual economies thus allocate a significantly different amount of GDP for the needs of the armed forces in dependence on political priorities of individual governments, public finances or overall economic condition of national economies. However, the results of the classification model reveal the fact that group of countries identified as core states of the “traditional” NATO member states (with above-average values of variables) do not allocate the long-term recommended amount of military expenditure of 2% of GDP. These countries are suspected of dangerous free-riding.

This study presents an analysis and quantitative summary of 18 NATO member country defense spending over the period 1953-2020. Using recently developed econometric techniques, we explore the time series properties of change, persistence and convergence in two indicators of NATO defense spending data typically used in the literature: real (2019) US dollars and Percent of GDP. Our two indicator variables display a mix of positive, negative and zero trends over the sample period. The only NATO countries with more than 2% defense spending after the 2006 and 2014 Summits are: Greece, Turkey, UK, USA and Poland. Using the fractional difference-based persistence tests of Martins and Rodrigues, we find only UK, Hungary and Poland dollar Defense Spending reject the null of a constant fractional difference (unit root) for the entire sample period; while seven NATO members reject the null of a constant fractional difference (unit root) for Percent of GDP. The mixed set of positive, negative and zero trends render the popular relative convergence test of Phillips and Sul inappropriate for our data. Using the more appropriate weak sigma-convergence test of Kong, Phillips and Sul, we find mixed evidence for convergence of our indicator variables. Our quantitative results present a mixed picture of statistical consistency and coherence for NATO defense spending. Our tests of persistence suggest major changes in the defense policies and spending of NATO members will have a lasting effect in most cases. The emergence and growth of serious threats and potential threats from Russia (and now potentially China as well) will require the NATO allies to address these issues.

This paper studies stationarity and cointegration of military expenditure and GDP for two subsamples of NATO member states. In particular, we employ newly developed unit root and cointegration tests which approximate an unknown number of smooth structural shifts in the low-frequency components of a Fourier expansion. The new unit root test indicates that military expenditure and GDP are non-stationary. Given the presence of several gradual shifts in the cointegration regression, our empirical results support the existence of stochastic comovement between military expenditure and GDP in the NATO member states. Additionally, we identified that income elasticities of the new member states are larger than those of the old member states, which implies that new member states appear to be more flexible, with their military expenditures more easily scaled up or down in accordance with economic performance.

This article analyses a range of problems faced by the NATO member states in the Baltic region in connection with Russian aggression in Ukraine. It is indicated that the Russian Federation boosts its military presence in the Kaliningrad Oblast: it deploys advanced missile systems and armored fighting vehicles to the region, increases its military contingent and rearms its Navy in the Baltic Sea. It is stressed that Russia has violated the 1987 Treaty on the Elimination of Intermediate-range and Shorter-range Missiles (the INF Treaty) and in recent years has been conducting large-scale military exercises.
 It is pointed out that amid the growing threat from Russia, the countries of the Baltic region have to reconsider their military strategies, to join their efforts in order to prevent any possible aggression. The NATO member states, the United States of America in particular, take part in the military drills in the region. Sweden’s military cooperation with NATO and the United States of America – a controversial issue in Swedish political circles – is discussed. The question of enhancing military interaction between the members of NATO – Germany and Norway, the Unites States and Poland – is addressed too. The advantages of building collective missile defense capability in the Baltic region and taking other steps to restrain Russia’s aggressive actions are indicated.

A study of the impact of military expenditures on economic growth and development examines the differences in the results of previous studies which led to contradictory conclusions. The authors find that these differences are due to sample variations, specificational choices, and the different time periods examined. The data indicate that there is no consistent, statistically significant connection between military spending and economic growth. Augmentation of the models suggests that military expenditures neither help nor hurt economic growth to any significant extent. 2 tables.

This paper examines the relationship between the defence spending of European NATO members and their exposure to asylum seekers. While research shows that threat perceptions and domestic politics partly determine the defence spending of a state, the effect of migration has so far not been studied. This is remarkable because migration is increasingly framed as a security threat, also by NATO and European Union member states. Using a panel analysis, this paper explores the relationship between the defence spending of 23 European NATO members and the number of asylum seekers they register each year between 2000 and 2020. Results show a positive and significant relationship between the number of asylum seekers registered in a country and its overall military expenditure relative to GDP, equipment spending, and infrastructure spending. These findings shed new light on the origins of defence spending in collective security alliances, at a time when transatlantic burden sharing is at the centre of societal and academic debates.

Armies’ capabilities are determined by their endowments of resources. The economic crisis that began in 2008 has distorted public budgets, which forced states to start cost-cutting policies. If we focus on the policy of new NATO member states, we can observe that public expenditure cuts affect defense budgets in different states in various ways. If we compare the defense capabilities of countries at the beginning of the economic crisis and ten years after the outbreak of the crisis, the reduction in defense spending is reflected in the loss of some defense capabilities due to the limited possibilities of maintaining and modernizing existing military equipment. Countries that have reduced their defense spending over the long term show a more significant loss of defense capability than countries that reduced their defense spending only in the period immediately after the economic crisis. The different approach to defense spending confirms the previously described phenomenon of free-riding by some NATO member states, which rely on the defense capabilities of their alliance partners while they are slowly losing their defense capabilities.

Russia's aggression against Ukraine and the scale of contemporary military threats require from the state bring its defense and defense planning system to the requirements of modern military art considering the experience of advanced NATO member states. In order to achieve the above, it is necessary to increase the effectiveness of defense planning in the Armed Forces and its other components of the defense force based on the Assessing and Developing Capability System to achieve Strategic goals of Defense reform and come closer to the standards of NATO member states.The purpose of the article is to find acceptable methodological approaches in the implementation of NATO Member States' best practices in defense planning based on the Assessing and Developing Capability System and further implementation in the Armed Forces of Ukraine and other Defense Forces, improving the effectiveness of Defense planning based on ADCS for further develop them according to the principles and standards adopted in the armies of NATO member states.The Capability-Based Defense Planning (CBDP) process in the Alliance is a fundamental means of developing the necessary capabilities, building them in a timely manner to achieve the desired level. The high level of CBDP effectiveness in NATO is a prerequisite for achieving the political, military and resource benefits that NATO member states expect. Most NATO member states, with implementing the CBDP, address not only the Alliance's needs, but also develop their own armed forces. However, some countries with a small Armed Forces are planning an Armed Forces development that addresses only NATO needs within the CBDP.Thus, a distinctive feature of the CBDP process in NATO is that each member state of the Alliance has its own CBDP system. The organization and implementation of which are influenced by the features of the economic structure of the state, adopted in it the system of forecasting and planning development; conditions and national traditions and interests, etc. And this requires the harmonization (integration) of national interests and plans of NATO development with NATO defense planning.

Today the states and the institutes of the West are focusing on the deterrence of Russia, containment of rather active powers of non-West (Iran, China). They are perceived by Western democracies as the sources of classical military security threats. At the same time, NATO and EU member states are vulnerable to non-classical security threats, which contain a noticeable non-military (non-force) component and are often created by non-state actors. The key examples are the instability risks such as mass uncontrolled migration, the spread of international terrorist groups, arms smuggling, and drug trafficking. Despite the efforts made, Western democracies were unable to effectively counter these non-classical threats in the second half of 2010-s — middle 2020-s. It was shown by the examples of the migratition crisis and the growing terrorist threat in the EU in 2015—2016. In the early 2020s NATO and EU member states were forced to withdraw strategically from the countries of origin of the conflict which were the key directions of efforts of the West aimed at the stabilization (the examples are Afghanistan and Mali). But ensuring the security of the international community, including the “Western democracies” themselves, requires continuing the fight against these threats of instability. The growing practical role belongs to Russia. Thus, Russia contributes to ensuring peace not only for itself and its partners, but also for Western countries which are unfriendly to it. The situation seems paradoxical only at first glance, being due to the indivisibility of international security. The article pays special attention to the importance of Russia's activity in Syria as practical help for the EU and NATO member states in the struggle with instability risks. The role of Russia as the guarantor in this field for “Western democracies” the scientific paper is also understood on the examples of the situation in the Middle East, North Africa and the Sahara-Sahel region, and even in Europe itself.

As a result of the 1999, 2004, 2009, 2017 and 2020 enlargements, the number of NATO members increased from 16 to 30, with the alliance including 14 new countries in Central and Eastern Europe as well as Southern and Eastern Europe. The different times at which individual countries joined the alliance allow assessing the effect of the accession process and the accession itself on the long- and short-run level of military expenditures of the countries involved. By using the difference in differences method in this article, it has been demonstrated that in a period of 1-3 years prior to the accession the military expenditures of countries applying for the alliance membership are significantly higher by approx. 0.1-0.2 percentage points of the GDP. In the years following the accession to the alliance, military expenditures level out as the increases of military expenditures are statistically insignificant. An increase in military expenditures prior to the accession is more pronounced in the Balkan states than in the countries of NATO’s Eastern Flank. Estimation results suggest that being a member of the alliance has a positive effect on the level of military expenditures, which constitutes an argument in favour of a lack of the free-riding among new NATO countries.

This study explores the complexity in the trade-offs between military expenditure, healthcare expenditure, and GDP growth across select Asian nations and major weapon-exporting countries, examining how nations allocate finite resources between national security and human well-being over the past two decades. Using a systems science approach, the research integrates Granger causality testing to analyze temporal and directional relationships among GDP growth, military expenditure, and healthcare expenditure, uncovering their dynamic interdependencies. The methodology includes trend and slope analysis, Granger causality testing, outlier detection, and clustering to identify heterogeneity in resource allocation strategies. Developed, weapon-exporting nations exhibit complementary trends, with strong causality between GDP growth and healthcare expenditure, reflecting economic stability and balanced allocation patterns. In contrast, developing Asian nations display fragmented and volatile relationships due to resource constraints and inefficiencies. Outlier analysis reveals country-specific dynamics, such as conflict-driven spending in Afghanistan and Myanmar and growth-focused strategies in China. Temporal trends show that economic crises, like the COVID-19 pandemic, significantly disrupt GDP growth but have limited long-term effects on healthcare or military expenditures. Clustering analysis identifies distinct groups of nations, shaped by economic capacity and geopolitical pressures. The findings emphasize the need for tailored policy frameworks to balance national security and human well-being, particularly in developing nations facing structural challenges. For sustainable development, policies must align resource allocation with economic priorities, geopolitical contexts, and societal needs.

This dissertation examines military spending in Sub-Saharan Africa (SSA). It comprises three chapters. Chapter one uses documents and key informant interviews to examine four important issues related to Uganda's defence budget: the process leading to its formulation, the key actors involved in that process, the structure of military expenditures, and the internal and external threat environment. The analysis shows that defence spending in Uganda generally follows a process of intra-governmental bargaining with political oversight. Despite the government's military roots, and the President's ultimate control over military spending, the defence budget has not overwhelmed other government priorities. In addition, the nature and level of internal and external threats to Uganda do not seem to pose a serious challenge to its security. While there are several perceived threats that may influence Uganda's defence budget, the limited volatility of military spending over time suggests that overall there is a perception that Uganda's government has been able to provide a reasonable level of security without compromising its obligations to promote social and economic development as well.Chapter two examines empirically the factors associated with the level and changes in military budget in Uganda, using an auto-regressive distributed lag model. The analysis shows that there is a long-run relationship between Uganda's military expenditure and real GDP, net official development assistance and security dynamics at regional level. Detailed analysis about which neighbour's military spending affects Uganda, however, is often different from expectations based on the interviews.Chapter three uses panel data to examine military spending in a sample of 30 of Sub-Saharan African countries for the period of 1988-2016. Two distinct specifications are performed, a fixed effects model and a dynamic panel data model. The results of different regressions show that the size of the economy, demography, military spending of neighbouring countries, and the lagged of military spending are the most important explanatory variables. Furthermore, the estimations of the fixed effect models show that the nature of the political regime and civil war also influence the defence budget. However, the estimations of the dynamic panel models fail to corroborate this influence.

The aim of the article is to analyse the impact of the development of security threats on the financing of the defence capabilities of NATO states. The author is based on the theory of defence financing as a public good and the analysis of empirical data on the development of defence spending and the negative impact of the “free rider”. In the first part, attention is paid to the theoretical definition of defence from the point of view of economic theory, and in the second part to the analysis of defence expenditures in NATO member countries. The author draws on the works of renowned authors such as [2, 6, 14,15]. In the first and second parts of the article, the author chose a positive approach. The author of the article conducted a literature search of theoretical literature and relevant political and legal documents of NATO, EU, Czech Republic and Slovak Republic. For the purpose of analysing the impact of security threats on military spending, the author analysed trends in NATO member states’ defence spending in the context of the “free rider” impact on the state's defence capability.

PurposeThe empirical analysis dealt in this paper emphasizes on the impact of military expenditures on out of pocket (OOP) healthcare payments. A sizeable body of defence economics literature has investigated the trade-off between military and public health expenditure, by testing the crowding-out or growth-stimulating hypothesis; does military expenditure scaling up crowd-out or promote governmental resources for social and welfare programs, including also state health financing?Design/methodology/approachIn this study, panel data from 2000 to 2018 for 129 countries is used to examine the impact of military expenditure on OOP healthcare payments. The dataset of countries is categorized into four income-groups based on World Bank's income-group classification. Dynamic panel data methodology is applied to meet study objectives.FindingsThe findings of this study indicate that military expenditure positively affects OOP payments in all the selected groups of countries, strongly supporting in this way the crowding-out hypothesis whereby increased military expenditure reduces the public financing on health. Study econometric results are robust since different and alternative changes in specifications and samples are applied in our analysis.Practical implicationsUnder the economic downturn backdrop for several economies in the previous decade and on the foreground of a potential limited governmental fiscal space related to the Covid-19 pandemic adverse economic effects, this study provides evidence that policy-makers have to adjust their government policy initiatives and prioritize Universal Health Coverage objectives. Consequently, the findings of this study reflect the necessity of governments as far as possible to moderate military expenditures and increase public financing on health in order to strengthen health care systems efficiency against households OOP spending for necessary healthcare utilization.Originality/valueDespite the fact that a sizeable body of defence economics literature has extensively examined the impact of military spending on total and public health expenditures, nevertheless to the best of our knowledge there is no empirical evidence of any direct effect of national defence spending on the main private financing component of health systems globally; the OOP healthcare payments.

ABSTRACTPrevious studies have offered static evidence of free‐riding behavior in military alliances; however, dynamic evidence remains largely unexplored. To address this gap, this study employs a time‐varying parameter vector autoregressive (TVP‐VAR) connectedness approach. This method provides dynamic insights, allowing us to identify unusual shifts in military spending dependence among NATO member states over time. Using this method, we observe a significant anomaly in March 2014, when Crimea's administrative authority shifted from Ukraine to Russia. Our findings indicate that this event substantially curtailed free‐rider behavior in military expenditure among NATO members. Furthermore, consistent with the existing literature, the results show a marked decline in free‐riding behavior following 1975, attributable to the implementation of the flexible response doctrine.