Defence Expenditures in Western Countries: Panel Data Analysis

Sosnovec, Jan

The purpose of this thesis is to examine main determinants of military expenditures of NATO members and other Western countries. These determinants are identified and their relations with military expenditures analyzed using regression analysis on an unbalanced data panel of 30 countries during the period 1969-2011. "Military burden' - share of defense expenditures on country's GDP - is used as the explained variable. Explanatory variables include main economic indicators - GDP per capita, population, economic growth, indebtedness etc. - as well as several variables related to security (e.g. the level of threat posed by the Soviet Union) or politics (ideological orientation of the government). The question of behavior within a military alliance (contribution versus free-riding) is also taken into account. The main findings are that there are significant structural differences between major military powers - the US, France and the UK - and the rest of the Western world, and similar differences appear to exist between the Cold War and the post-Cold War periods. Furthermore some evidence is provided for the commonly held belief that smaller NATO members are essentially free-riding on the protection provided by few major powers (especially the US). Powered by TCPDF (www.tcpdf.org)

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