The defence economy: an assessment of productivity change in NATO countries

ABSTRACT

The main purpose of this paper is to find the determinants of productivity growth and its evolution over time for 27 North Atlantic Treaty Organization (NATO) countries over the period 2010–2017, with respect to the Global Peace Index. To this end, a production function was estimated for each year using Data Envelopment Analysis (DEA) methodology while the components of efficiency change, technical change, scale efficiency change and productivity change were calculated using the Malmquist Index for determining the change in productivity over time. According to the results obtained, the countries show a variation in productivity with a rising trend of 2%; Albania, Belgium, Croatia, Czech Republic, France, Germany, Greece, Montenegro, Slovenia, Norway and the United Kingdom being the countries where the rise was more intense. Moreover, relative productivity fell in 11 other countries in the period under review. In particular, with regard to efficiency change, the countries improved on average by 0.2%, with Portugal showing the greatest rise and France the smallest. Regarding technical change, it rose on average by 5.2%. Finally, scale efficiency fell on average by 3.3%, with Romania being the most disadvantaged and Portugal the most favoured.

KEYWORDS:

• Data envelopment analysis
• productivity
• Malmquist index
• defence economy

JEL CLASSIFICATION:

• C67
• D24

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ Decision-Making Unit; which may be companies or public organizations. In the case under study, they are countries that belong to NATO.

² NATO Countries: Albania, Belgium, Bulgaria, Croatia, Czech Republic, Estonia, France, Germany, Greece, Hungary, Italy, Latvia, Lithuania, Montenegro, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Turkey, UK, Canada and U.S.A.

³ http://visionofhumanity.org/indexes/global-peace-index.

Additional information

Funding

J. Aparicio thanks the grant PID2019-105952GB-I00 funded by Ministerio de Ciencia e Innovación/Agencia Estatal de Investigación/10.13039/501100011033. Additionally, J. Aparicio thanks the grant PROMETEO/2021/063 funded by the Valencian Community (Spain).