Reassessing the public goods theory of alliances

Abstract

The public goods theory of alliances exerts substantial influence on scholarship and policy, especially through its claim that small alliance participants free-ride on larger partners. Prior statistical tests of free-riding suffer from model specification and generalizability problems, however, so there is little reliable and general evidence about this prediction. In this study, I address those limitations with a new test of the free-riding hypothesis. Using data on 204 alliances from 1919 to 2007, I examine how often states with a small share of total GDP in an alliance decrease military spending while states with a large share of allied GDP increase military spending. I find little evidence to support this expression of the free-riding hypothesis. This implies that free-riding based on economic weight is unusual in alliance politics, which may be due to limits on alliance security as a public good or bargaining between alliance members.

Net spills among NATO allies: Theory and empirical evidence from dynamic quantile connectedness

“…The latter concluded that the pattern of free-riding and lack of response to heightened Russian defence spending probably encouraged the invasion, as NATO appeared divided. On the other hand, our results are in contrast with those of Alley (2021) who finds that free-riding behavior based on economic weight is unusual in alliance politics, which may be due to limits on security as a public good or bargaining between alliance members. Finally, the above empirical analysis consistently interprets the major geopolitical events of the examined period.…”

“…In the case of NATO, free-riding is attributable to members' feeling of security, rather than size, with countries responding both to the growth in American military spending on the one hand, and the growth of Soviet spending on the other between 1956 and 1988. More recently, Alley (2021), who studies 204 alliances from 1919 to 2007, finds little evidence to support the free-riding hypothesis, attributing low defence spending to allied capability or efficiency gains from specialising in pooled military resources.…”

“…I n this section, we expand the economic theory of alliances (Olson and Zeckhauser, 1966), modifying a model that borrows from George and Sandler (2018, 2021, to incorporate the spills that stem from the obligations of each ally by introducing the notion of spill-outs of ally i, derived from its defence expenditure and diffused into the N-1 allies and the notion of net spills, namely the difference between spill-outs and spill-ins.…”

“…Once this is the alliance environment, one can then argue that defence expenditure for each ally, as well as in the overall context, is sub-optimal in terms of Pareto optimisation, pointing instead to the direction of a Nash equilibrium. 2 In technical terms, following George and Sandler (2018, 2021, the welfare function of each ally can be expressed as depending on the consumption of a non-defence good c i , the collective defence good…”

Free Riding Reconsidered: The Influence of Space and Time on NATO Member States’ Defence Spending

“…Theoretically, the concept of free riding is quite clear; yet its operationaliza-tion is not straightforward. 1 Researchers have mostly analyzed NATO. They have tried to capture free riding by looking at whether smaller members spend less on defence in proportion to GDP (Alley 2021; Kim and Sandler 2020); how countries respond to increasing military expenditure on behalf of the US (e.g., Spangler 2018); or whether and how NATO allies historically reacted to increased threats from potential adversaries, notably the Soviet Union (Plümper and Neumayer 2015).…”