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Defence Spending, Institutional Environment and Economic Growth: Case of NATO

Natalia Utrero-González (), Jana Hromcová () and Francisco Callado-Muñoz ()

Working Papers from Department of Applied Economics at Universitat Autonoma of Barcelona

Abstract: This paper analyses the impact of participating in a military alliance on the nexus between defence spending and economic growth. In particular, we study how the process of gradual association to a military organization influences the defence spending of new-comers, and consequently their economic growth. Conclusions from the theoretical model are tested empirically for countries in the North Atlantic Treaty Organization. Results show that the prospect of intensified military alliance partnership and membership has a positive effect on economic growth. In addition, increased security and stability gained by closer military cooperation reinforces the positive link with economic growth. Empirical evidence supports theoretical priors.

Keywords: military alliance; defence spending; public spending; growth. (search for similar items in EconPapers)
JEL-codes: D74 H5 O4 (search for similar items in EconPapers)
Date: 2017-07
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