A model to explain changes in European defence spending

What is it about?

The article proposes a new way of modelling (European) governmental decisions with respect to defence spending levels, taking into consideration fiscal policy constraints (in particular the European Union's rules on public debt, which should not exceed 60% of GDP), and Europe's contemporary security environment, including the resurgence of Russia as an assertive military power.

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Why is it important?

The article has two main contributions. The first is that it revisits the traditional model of the demand for military expenditure and extends it by introducing fiscal indicators, in particular gross public debt. Rather than explore how public debt might increase because of higher defence spending (as has been analysed in several contributions in recent years), the opposite relationship is explored in this article, namely the extent to which high public debt may act as a constraint on chosen levels of defence spending. Very little research has been done on this particular relationship, and so the article addresses a gap in the existing literature. The second contribution is to empirically test whether European defence spending has responded to the adoption of a more aggressive military posture on the part of the Russian Federation. While traditional research efforts in the 1980s assessed the impact of Soviet defence spending on Western defence spending, this article is among the first in the defence economics literature to re-visit the impact of Russia's actions and posture on European defence spending levels in the contemporary security environment (i.e. since Russia's illegal annexation of Crimea in 2014).

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