Courtship, Honeymoon, and Stabilisation? Military Expenditures of New NATO Member Countries Before and After the 1999–2020 Enlargements

ABSTRACT

As a result of the 1999, 2004, 2009, 2017 and 2020 enlargements, the number of NATO members increased from 16 to 30, with the alliance including 14 new countries in Central and Eastern Europe as well as Southern and Eastern Europe. The different times at which individual countries joined the alliance allow assessing the effect of the accession process and the accession itself on the long- and short-run level of military expenditures of the countries involved. By using the difference in differences method in this article, it has been demonstrated that in a period of 1-3 years prior to the accession the military expenditures of countries applying for the alliance membership are significantly higher by approx. 0.1-0.2 percentage points of the GDP. In the years following the accession to the alliance, military expenditures level out as the increases of military expenditures are statistically insignificant. An increase in military expenditures prior to the accession is more pronounced in the Balkan states than in the countries of NATO’s Eastern Flank. Estimation results suggest that being a member of the alliance has a positive effect on the level of military expenditures, which constitutes an argument in favour of a lack of the free-riding among new NATO countries.

KEYWORDS:

• Economics of alliances
• free-riding in alliances
• collective decision making
• NATO enlargements

JEL CLASSIFICATION:

• H56
• H76

Acknowledgement

The author would like to acknowledge Zareh Asatryan and Daniela Steinbrenner for research ideas and two anonymous reviewers for their useful comments.

Disclosure Statement

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

Notes

1. Or rather its perception by decision-makers, see e.g. Cimbala and Forster (2010).

2. Due to a lack of data, Albania and Slovenia are present in the sample from 1992; Estonia, Czechia and Slovakia from 1993 (i.e. from the dissolution of Czechoslovakia); Croatia, Lithuania and Latvia from 1995; North Macedonia from 1996; and Montenegro from 2006 (i.e. from gaining independence). The military expenditures of the entire USSR were assumed as the military expenditures of Russia in 1991.