Empirical Analysis of Military Expenditures in NATO Nations

Jakub Odehnal,Lenka Brizgalová,Jiří Neubauer,Jana Boulaouad,Aleš Olejníček

doi:10.3390/economies9030107

Jakub Odehnal, Lenka Brizgalová + Show 3 more

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https://doi.org/10.3390/economies9030107

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Journal: Economies	Publication Date: Jul 23, 2021
Citations: 7	License type: CC BY 4.0

Affiliation: University of Defence

Abstract

The aim of the article is to identify possible “follower” behaviour; it means to reveal countries following the average military burden of North Atlantic Treaty Organization (NATO) member states. To analyse the relationship between military expenditure of NATO member states and selected socio-economic variables (average military burden of NATO member states, gross domestic product, government expenditure (non-military), share of trade balance of gross domestic product and population), the Autoregressive Distributed Lag model has been used. The short-term results demonstrate follower behaviour, especially in the new NATO member states (effort to fulfil the commitment to spend 2% of gross domestic product on defence). The long-term results have revealed a positive relationship between military expenditures and the variable describing the average military burden of NATO member states in the traditional and also new NATO member states. A positive relationship between military expenditure and gross domestic product has also been observed in the majority of evaluated countries in the long-term model. The public good effect has been determined in six member states only, and the crowding out effect in five member states. A positive effect of the balance of trade on military expenditure has been observed in two countries only.

Highlights

The aim of the article is to identify possible “follower” behaviour; it means to reveal countries following the average military burden of North Atlantic Treaty Organization (NATO)
The results of the model have revealed potential followers, i.e., countries that did not rely on NATO-based defence only, which can have some characteristic features of a public good, in the analysed period, but contributed to increasing military expenditure, that could gradually converge or at least narrow the gap between military expenditure of European
The results indicate an increase in unequal military expenditure sharing in the event of NATO enlargement

Summary

Introduction

The 2002 NATO Summit in Prague represented a milestone for NATO member states, consisting of reaching a broad consensus on the necessity to spend the recommended two percent of gross domestic product on defence. This paper is a follow-up to the study of Nikolaidou (2008), analysing military expenditure of selected European countries by means of an ARDL model. Data arising from the model of Nikolaidou (2008) describing the relationship between military expenditure (military expenditure in constant prices) and selected socio-economic variables (population, gross domestic product, government expenditure (non-military), share of trade balance of GDP, and average military burden of NATO member states) has been examined. The results of the model have revealed potential followers (if the sign of variable average military burden of NATO is positive), i.e., countries that did not rely on NATO-based defence only, which can have some characteristic features of a public good, in the analysed period, but contributed to increasing military expenditure, that could gradually converge or at least narrow the gap between military expenditure of European.

Literature Overview

Data Description

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Results and Discussion

Conclusions