EU Demand for Defense, 1990–2019: A Strategic Spatial Approach

Justin George and Todd Sandler
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Justin George: Department of Agricultural, Food, and Resource Economics, Michigan State University, 426 Auditorium Road, East Lansing, MI 48824, USA

Games, 2021, vol. 12, issue 1, 1-18

Abstract: For 1990–2019, this study presents two-step GMM estimates of EU members’ demands for defense spending based on alternative spatial-weight matrices. In particular, EU spatial connectivity is tied to EU membership status, members’ contiguity, contiguity and power projection, inverse distance, and arms trade. At a Nash equilibrium, our EU demand equations are derived explicitly from a spatially based game-theoretical model of alliances. Myriad spatial linkages among EU members provide a robust free-riding finding, which differs from the spatial and non-spatial literature on EU defense spending. Even though the EU applies common trade policies and allows for unrestricted labor movement among members, members’ defense responses adhered to those of a defense alliance. Moreover, EU defense spending exhibits positive responses to GDP and transnational terrorist attacks, and a negative response to population. During the sample period, EU members did not view Russia as a military threat.

Keywords: European Union (EU), spatial autoregression and connectivity; alliance; strategic free riding; Nash equilibrium (search for similar items in EconPapers)
JEL-codes: C C7 C70 C71 C72 C73 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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