Home Trade and Military Alliances: Evidence from NATO
Article
Licensed
Unlicensed Requires Authentication

Trade and Military Alliances: Evidence from NATO

  • Francisco J. Callado-Muñoz ORCID logo EMAIL logo , Jana Hromcová ORCID logo and Natalia Utrero-González ORCID logo
Published/Copyright: December 4, 2019

Abstract

In this paper we analyse the effect of multilateral defence alliances in arms trade among allies. We postulate that the access to the frontier technology weaponry enabled only to military allies will intensify arms trade. The benefits of such trade are claimed to be in security and technology diffusion. We execute an empirical analysis for the North Atlantic Treaty Organization (NATO). Results show that being a member or partner of NATO significantly increases arm imports coming from the alliance, and that this increase cannot be attributed to economic and additional country characteristics.

JEL Classification: F53; O33; H5; O5

Funding source: European Social Fund

Award Identifier / Grant number: ECO2016-76255-P

Funding statement: Financial support from the Ministry of Education and Science through grants RTI2018-095799-B-I00 (MINECO/FEDER), ECO2017-86305-C4-2-R, ECO2016-76255-P, the Regional Government of Aragón and the European Social Fund (S125 project: Compete), and the Centro Universitario de la Defensa Zaragoza through the 2018-12 project is gratefully acknowledged.

Appendix

Table A:

List of countries.

Afghanistan, Albania, Algeria, Armenia, Australia, Austria, Azerbaijan, Bahrain, Belarus, Belgium, Bosnia-Herzegovina, Bulgaria, Canada, Colombia, Croatia, Czech Rep., Denmark, Egypt, Estonia, Finland, France, Georgia, Germany, Greece, Hungary, Iceland, Iraq, Ireland, Israel, Italy, Japan, Jordan, Kazakhstan, Korea, Kuwait, Kyrgyzstan, Latvia, Lithuania, Luxemburg, Macedonia, Malta, Mauritania, Moldova, Mongolia, Montenegro, Morocco, Netherlands, New Zealand, Norway, Pakistan, Poland, Portugal, Qatar, Romania, Russia, Serbia, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Tajikistan, Tunisia, Turkey, Turkmenistan, UAE, UK, USA, Ukraine, Uzbekistan

References

Arellano, M., & Bover, O. (1995). Another look at the instrumental variable estimation of error-components models. Journal of Econometrics, 68, 29–51.10.1016/0304-4076(94)01642-DSearch in Google Scholar

Bergsmann, S. (2001). The concept of military alliance, small states and alliances, 25–37. ISBN 978-3-7908-2492-6. ISBN 978-3-662-13000-1.10.1007/978-3-662-13000-1_4Search in Google Scholar

Blinder, A. S. (1973). Wage discrimination: reduced form and structural estimates. Journal of Human Resources, 8, 436–455.10.2307/144855Search in Google Scholar

Blum, J. (2019). Arms production, national defense spending and arms trade: examining supply and demand. European Journal of Political Economy, in press.10.1016/j.ejpoleco.2019.101814Search in Google Scholar

Bove, V., Deiana, C., & Nisticò, R. (2018). Global arms trade and oil dependence. Journal of Law, Economics and Organization, 34, 272–299.10.1093/jleo/ewy007Search in Google Scholar

Brauer, J. (2000). Potential and actual arms production: implications for the arms trade debate. Defence and Peace Economics, 11, 461–480.10.4324/9780203477168_chapter_3Search in Google Scholar

Chalmers, M. (2001). “The atlantic burden-sharing debate- widening or fragmenting?” International Affairs, 77, 569–585.10.1111/1468-2346.00207Search in Google Scholar

Flockhart, T. (2014). Introduction. In T. Flockhart (Ed.) Changing partnerships in a changing World (Vol. 1, pp. 17–34). Cooperative Security: NATO’s Partnership Policy in a Changing World. DIIS Report 2014. Copenhagen: Danish Institute for International Studies.Search in Google Scholar

García‐Alonso, M. C., & Hartley, K. (2000). Export controls, market structure and international coordination. Defence and Peace Economics, 11, 481–503.10.1080/10430710008404962Search in Google Scholar

Gleditsch, N. P., Wallensteen, P., Eriksson, M., Sollenberg, M., & Strand, H. (2002). Armed conflict 1946–2001: a new dataset. Journal of Peace Research, 39, 615–637.10.1177/0022343302039005007Search in Google Scholar

Gowa, J., & Mansfield, E. D. (2004). Alliances, imperfect markets, and major-power trade. International Organization, 58, 775–805.10.1017/S002081830404024XSearch in Google Scholar

Haim, D. A. (2016). Alliance networks and trade: the effect of indirect political alliances on bilateral trade flows. Journal of Peace Research, 53, 472–490.10.1177/0022343316630938Search in Google Scholar

Hartley, K. (2000). The benefits and costs of the UK arms trade. Defence and Peace Economics, 11, 445–459.10.1080/10430710008404960Search in Google Scholar

Long, A. G., & Leeds, B. A. (2006). Trading for security: military alliances and economic agreements. Journal of Peace Research, 43, 433–451.10.1177/0022343306065884Search in Google Scholar

McGrattan, E., & Prescott, E. C. (2009). Openness, technology capital, and development. Journal of Economic Theory, 144, 2454–2476.10.3386/w13515Search in Google Scholar

Oaxaca, R. (1973). Male-female wage differentials in urban labor markets. International Economic Review, 14, 693–709.10.2307/2525981Search in Google Scholar

Roodman, D. (2009). How to do xtabond2: an introduction to “difference” and “system” GMM in Stata. The Stata Journal, 9, 86–136.10.1177/1536867X0900900106Search in Google Scholar

Rynning, S. (2011). Why connect? On the conceptual foundations of NATO partnerships. In R. Alcaro & S. Lucarelli (Eds.), Managing change: NATOS’s partnerships and deterrence in a globalized World. Norfolk Virginia: NATO Allied Command Transformation.Search in Google Scholar

Saal, D. (2001). The impact of procurement-driven technological change on US manufacturing productivity growth. Defence and Peace Economics, 12(6), 537–568.10.1080/10430710108405002Search in Google Scholar

Sandler, T. (2000). Arms trade, arms control, and security: collective action issues. Defence and Peace Economics, 11, 533–548.10.4324/9780203477168_chapter_13Search in Google Scholar

Schiff, M., & Wang, Y. (2003). Regional integration and technology diffusion: the case of North American free trade agreement. World Bank Policy Research Working Paper, 3132.10.1596/1813-9450-3132Search in Google Scholar

SIPRI. Yearbook. (2018). Retrieved from https://www.sipri.org/yearbook/2018.Search in Google Scholar

Smith, R. P., & Tasiran, A. (2005). The demand for arms imports. Journal of Peace Research, 42, 167–181.10.1177/0022343305050689Search in Google Scholar

Wallander, C. A. (2000). Institutional assets and adaptability: NATO after the cold war. International Organization, 54, 705–735.10.1162/002081800551343Search in Google Scholar

Windmeijer, F. (2005). A finite sample correction for the variance of linear efficient two-step GMM estimators. Journal of Econometrics, 126, 25–51.10.1016/j.jeconom.2004.02.005Search in Google Scholar

Yakovlev, P. (2007). Arms trade, military spending, and economic growth. Defence and Peace Economics, 18, 317–338.10.1080/10242690601099679Search in Google Scholar

Zhu, L., & Jeon, B. N. (2007). International R&D spillovers: trade, FDI, and information technology as spillover channels. Review of International Economics, 15, 955–976.10.1111/j.1467-9396.2007.00691.xSearch in Google Scholar


Article note

We are grateful to participants at the nineteenth edition of the Conference on International Economics, the 19th Jan Tinbergen European Peace Science Conference and the editors for helpful suggestions and comments.


Published Online: 2019-12-04

© 2019 Walter de Gruyter GmbH, Berlin/Boston

Downloaded on 1.10.2025 from https://www.degruyterbrill.com/document/doi/10.1515/peps-2019-0027/html
Scroll to top button