Defense Spending, Conflict and Economic Growth in Europe

Knezović Sandro () and Tkalec Marina ()
Additional contact information
Knezović Sandro: Research Adviser, Institute for Development and International Relations, Zagreb, Croatia
Tkalec Marina: Senior Research Associate, Institute of Economics, Zagreb, Croatia

Peace Economics, Peace Science, and Public Policy, 2025, vol. 31, issue 4, 461-486

Abstract: This study seeks to answer the following research question: How do defense spending and conflict impact economic growth in Europe, and what role does NATO membership play in shaping these dynamics? Using a panel dataset of 40 European countries from 1999 to 2023, the analysis investigates a change in security dynamics in Europe post-2014, determinants of military expenditure, whether NATO’s influence is more pronounced for countries closer to Russia, and how military expenditure and conflict impact economic performance. Employing panel econometric techniques, the analysis reveals that while military expenditure is not directly correlated with GDP per capita growth, conflict exerts a profoundly negative effect, with battle-related deaths significantly reducing economic performance. NATO membership is associated with increased defense spending, where geographical distance to Russia implies weakening of NATO countries’ military budgets. For NATO members, higher US military expenditure correlates with reduced European spending, highlighting reliance on American security provisions. The findings underscore the complex dynamics between defense allocations, alliance structures, and economic conditions, emphasizing the need for balanced policy approaches that address security imperatives without compromising long-term economic growth.

Keywords: defense spending; economic growth; military expenditure; NATO; panel data (search for similar items in EconPapers)
JEL-codes: C33 H56 N44 O11 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1515/peps-2025-0004 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bpj:pepspp:v:31:y:2025:i:4:p:461-486:n:1001

Ordering information: This journal article can be ordered from
https://www.degruyte ... ournal/key/peps/html

DOI: 10.1515/peps-2025-0004

Access Statistics for this article

Peace Economics, Peace Science, and Public Policy is currently edited by Raul Caruso

More articles in Peace Economics, Peace Science, and Public Policy from De Gruyter
Bibliographic data for series maintained by Peter Golla ().