Effiency evaluation of NATO member nations from a defence economics perspective

  1. Domínguez Sánchez, Mónica 1
  2. Aparicio Baeza, Juan 2
  3. Fonfría Mesa, Antonio 3
  1. 1 Nacional Distance Education University
  2. 2 Universidad Miguel Hernández de Elche
    info

    Universidad Miguel Hernández de Elche

    Elche, España

    ROR https://ror.org/01azzms13

  3. 3 Universidad Complutense de Madrid
    info

    Universidad Complutense de Madrid

    Madrid, España

    ROR 02p0gd045

Revista:
BEIO, Boletín de Estadística e Investigación Operativa

ISSN: 1889-3805

Año de publicación: 2021

Volumen: 37

Número: 3

Páginas: 183-207

Tipo: Artículo

Otras publicaciones en: BEIO, Boletín de Estadística e Investigación Operativa

Resumen

The main objective of this article is the evaluation of the efficiency and its evolution over time of 27member countries of the North Atlantic Treaty Organization (NATO). We analyse the relationshipbetween defense expenditure and the spending on military personnel as well as how security isperceived by citizens. To this end, a data panel for the years 2010 to 2017 has been used, consistingof various inputs at the macroeconomic level and one output, associated with the performance ofthe defense sector of NATO countries. For this, a production function has been estimated basedon Data Envelopment Analysis methodology. According to the results obtained, the countries showhigh efficiency rates, around 80% with an increasing trend of 2.5% in the period studied. Thus,the estimated average technical efficiency was approximately 85.3%, that is, the NATO countriesanalyzed could increase their citizen security index by around 14.7 % without modifying the resourcesused in their defense.

Referencias bibliográficas

  • Asseery, AA. (1996). Evidence from Time Series on Militarising the Economy: The Case of Iraq.Applied Economics. 28 (10) 1257-1261.
  • Badin, L., Daraio, C., Simar, L. (2014). Explaining inefficiency in nonparametric production models:the state of the art.Annals of Operations Research, 214(1), 5-30.
  • Banker, R. D. and Charnes, A., and Cooper, W. W. (1984). Some models for estimating technicaland scale inefficiencies in data envelopment analysis.Management Science, 30(9), 1078-1092.
  • Banker, R.D. and Morey, R.C. (1986). Efficiency analysis for exogenously fixed inputs and outputs.Operations Research, 34(4), 513-521.
  • Briec, W. (1998).H¨older Distance Functions and Measurement of Technical Efficiency. Journal ofProductivity Analysis, 11: 111-131.
  • Briec, W. and Lemaire, B. (1999). Technical efficiency and distance to a reverse convex set.EuropeanJournal of Operational Research, 114: 178-187.
  • Charnes, A., Cooper, W. W., and Rhodes, E. (1978). Measuring the efficiency of decision makingunits.European Journal of Operational Research, 2(6), 429-444.
  • Chen and Sherman (2004). The benefits of non-radial vs. radial super-efficiency DEA: an applicationto burden-sharing amongst NATO member nations.Socio-Economic Planning Sciences.38, 4, Pages307-320.
  • Cherchye, L., Moesen, W., and Puyenbroeck, T. (2004). Legitimately diverse, yet comparable: onsynthesizing social inclusion performance in the EU.JCMS: Journal of Common Market Studies42(5): 919-955.
  • Chletsos, M. and C. Kollias. 1995. ‘The demand for Turkish military expenditure 1960–1992.’CyprusJournal of Economics8 (1): 64–74.
  • Cooper. W.W.. Seiford. L.M. and Tone. K. (2000). Data envelopment analysis: a comprehensivetext with models. applications. references and DEA-solver software.Kluwer Academic Publishers.Boston.
  • Davis, D.M. (2011). Designing a viable prediction market to forecast defense acquisition cost andschedule outcomes.Defence and Peace Economics. 22:3, 351-366.
  • Driver, D. (2016) Burden sharing and the future of NATO: wandering between two worlds,Defenseand Security Analysis, 32:1, 4-18
  • Duch-Brown, N., Fonfría, A. and Trujillo-Baute, E. (2014). Market structure and technical efficiencyof Spanish defense contractors.Defence and Peace Economics. Vol. 5, nº1, pp. 23-38.
  • Dunne, J P and Nikolaidou, E. (2005) Military spending and economic growth in Greece, Portugaland Spain.Frontiers in Finance and Economics2 (1), 1-17.
  • Dunne, J.P. and Tian, N. (2015) Military Expenditure, Economic Growth and Heterogeneity,Defenceand Peace Economics, 26:1, 15-31.
  • Dunne, P. and Vougas, D. (1999). Military Spending and Economic Growth in South Africa: ACausal Analysis.Journal of Conflict Resolution, 43(4), 521–537.
  • Dunne, P., Nikolaidou, E. and Smith, R. (2002). Military Spending, investment and. EconomicGrowth in Small Industrialising Economies.The South African Journal of Economics70 (5) 1–27.
  • Dunne, P., Smith, R.P. and Willenbockle, D. (2018). Models of Military Expenditure and Growth: ACritical Review.Defence and Peace Economics, 16 (6), 449-461.
  • Ebrahimnejad, A. and Tavana, M. (2014). An interactive MOLP method for identifying target unitsin output-oriented DEA models: The NATO enlargement problem.Measurement, 52, 124-134.
  • Farrell, M. J. (1957). The measurement of productive efficiency.Journal of the Royal StatisticalSociety: Series A (General), 120(3), 253-281.
  • Ghazalian, P.L and Hammoud, M. (2020). The Peace Level of Nations: An Empirical Investigationinto the Determining Factors.Defence and Peace Economics
  • Global Peace Index (2019). Measuring Peace in a complex world. Institute for Economics and Peace.Sydney, June 2019. Available from:http://visionofhumanity.org/indexes/global-peace-index.
  • Grautoff, M. and Miranda, F. C. (2009). Analysis of military spending from the perspective of thedefense economy: The Colombian case 1950-2006.Ecos de Economia, 13(28), 199-237.
  • Hanson, T. (2016). Efficiency and productivity in the operational units of the armed forces: ANorwegian example.International Journal of Production Economics, 179, 12-23.
  • Hartley, K. (2011). Exit defense measures: an economic perspective. Contract report: DRDC CORACR 2011-178.Center for Research and Operational Analysis.
  • Hildebrandt, G. G. (2007). Budget estimating relationships for depot-level repairables in the AirForce flying hour program (Vol. 355).Rand Corporation.
  • Hunter, E and Pernik, P. (2015). The challenges of hybrid warfare.Analysis. International Centerfor Defence and Security. Estonia.
  • Kollias, C., Manolas, G., and Paleologou, S. M. (2004). Defence expenditure and economic growth inthe European Union: a causality analysis.Journal of Policy Modeling, 26(5), 553-569.
  • Lebovic, J.H. and Ishaq, A. (1987) Military burden, security needs, and economic growth in theMiddle East’,Journal of Conflict Resolution, 31 (1), 106–138.
  • Lee, S.C., Lee, C. T., and Wu, S.F. (2016) Military spending and growth: a small open economystochastic growth model,Defence and Peace Economics, 27: 1,105-116.
  • Leibenstein (1966). Allocative Efficiency vs. X- Efficiency. Harvey Leibenstein.The AmericanEconomic Review, Volume 56, Issue 3, 392-415.
  • Lovell, C. K., Pastor, J. T., and Turner, J. A. (1995). Measuring macroeconomic performance in theOECD: A comparison of European and non-European countries.European Journal of OperationalResearch, 87(3), 507-518.
  • Lovell, C. A. K., & Pastor, J. T. (1999). Radial DEA models without inputs or without outputs.European Journal of Operational Research118: 46-51.
  • Macnair, E, J. Murdoch, C., and T. Sandler (1995), Growth and defense: pooled estimates for the NATO alliance, 1951-1988.Southern Economic Journal, 61 846-860.
  • Martí, Sempere, C., and Fonfria, Mesa, A. (2020). An Analysis of the Defence Industrial MarketBased on Agents,Defence and Peace Economics, 31:2, 220-244,
  • Martínez González, A., and Rueda López, N. (2005). Productividad del sector de defensa y deseguridad.Econom´ıa Industrial, ISSN 0422-2784, N 393, 2014 p´ags.121-128.
  • Martínez González, A., and Rueda López, N. (2013). A productivity and efficiency analysis of thesecurity and defence technological and industrial base in Spain.Defence and Peace Economics, 24(2),147-171.
  • Mintz, A., and Huang, C. (1990). Defense expenditures, economic growth, and peace dividend.American Political Science Review, 84(4), 1283–1293.
  • Nayar, P., Ozcan, Y. A., Yu, F., and Nguyen, A. T. (2013). Benchmarking urban acute care hospitals:efficiency and quality perspectives.Health Care Management Review, 38(2), 137-145.
  • Neira, M.A.A. and González A.M., (2007). Los determinantes pol´ıticos y econ´omicos del gasto endefensa un estudio a trav´es de t´ecnicas de datos de panel para los pa´ıses europeos de la OTAN(1975-2005).Anales de Econom´ıa AplicadaVol. 5, ISBN 84-96477-93-2, p´ags. 154-182.
  • North Atlantic Treaty Organization (NATO). 2010 to 2017 Financial and economic data relatedto NATO defense. Brussels, Belgium: NATO, Press and Media.https://www.nato.int/nato_static_fl2014/assets/pdf/pdf_2018_03/20180315_SG_AnnualReport_fr.pdf
  • Prieto, A. M., and Zofio, J. L. (2001). Evaluating effectiveness in public provision of infrastructureand equipment: the case of Spanish municipalities.Journal of Productivity Analysis, 15(1), 41-58.
  • Scalco, P. R., Amorim, A. L., and Gomes, A. P. (2012). Eficiencia t´ecnica de la polic´ıa militar enMinas Gerais.Nova Economia, 22(1), 165-190.
  • Scheetz, T. (1991). The macroeconomic impact of defence expenditures: some econometric evidencefor Argentina, Chile, Paraguay and Peru.Defence and Peace Economics, 3(1), 65-81.
  • Shephard, R.W., (1953) Cost and Production Functions, PrincetonUniversity Press, Princeton, NJ.
  • Smith, R. (1980) Military expenditure and investment in OECD countries. 1954–1973.Journal of Comparative Economics, 4 (1)19-32.
  • Spendolini, M. J. (1994). Benchmarking.Bogot´a: Norma S.A. p. 11.
  • Ward, M.D. and Davis, D. (1992). Sizing up the Peace Dividend: Economic Growth and MilitarySpending in the United States, 1948-1996.American Political Science Review, 86 (3) 748–755.