ALLIANCE PARTICIPATION AND MILITARY SPENDING A Dissertation by JOSHUA KEEGAN ALLEY Submitted to the Office of Graduate and Professional Studies of Texas A&M University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY Chair of Committee, Matthew Fuhrmann Committee Members, Hyeran Jo William R. Clark Jasen J. Castillo Head of Department, Guy D. Whitten August 2020 Major Subject: Political Science Copyright 2020 Joshua Keegan Alley ABSTRACT In this dissertation, I examine how participation in military alliances impacts military spending. Despite expectations that alliances affect military spending, we still do not know how. One group of scholars claims that alliance participation often decreases military spending, but another group expects that alliance participation increases military spending. I offer an answer to this longstan- ding puzzle by explaining when alliance participation increases or decreases military spending. First, I reassess a well known framework for understanding alliances — the public goods model of alliances. Then, I describe how treaty depth modifies the impact of alliance participation on non- major power military spending. Last, I show that states add depth to alliance treaties to reassure their partners while reducing exposure to entrapment, so democracies often form deep alliances. Taken together, the argument and evidence in this project indicate that efforts to establish cre- dible alliance commitments shape the bargaining leverage of states, which then determines how alliance participation affects military spending. To start, I examine the public goods model of alliances, and find that differences in economic weight do not lead to differences in military spen- ding. As a result, my argument relies on bargaining between alliance members, and claims that how alliance participation affects military spending depends on state capability and alliance treaty design. Specifically, treaty depth modifies how non-major power military spending responds to alliance participation. Treaty depth refers to the extent of defense cooperation formalized in the alliance through promises like policy coordination and basing rights. When security-seeking non- major powers join deep alliances they usually decrease military spending, because these treaties are more credible. Joining shallow alliances often increases non-major power military spending due to credibility concerns and higher allied leverage. Finally, I show that deep alliances are the result of efforts to increase the credibility of alliance commitments while managing the risk of en- trapment. I argue that because treaty depth has limited domestic audience costs but reassures allies, democracies often form deep alliances to increase the credibility of their alliances while managing exposure to entrapment. ii To test this argument, I make two innovations in research design. First, I provide a general and reliable test of the public goods theory of alliances, which is missing from previous research. Then, I build a multilevel model to show how alliance characteristics like treaty depth modify the impact of alliance participation on military spending. Multilevel modeling addresses limitations of previous research designs by estimating the unique effect of individual alliances. iii DEDICATION To Mary Ann Baner, a great teacher and trailblazer. iv ACKNOWLEDGMENTS Science is a collective endeavor, and this dissertation is no exception. First, my thanks to an outstanding committee. Matthew Fuhrmann provided patient, thorough feedback and guidance in honing both the content and presentation of this project. Hyeran Jo offered perceptive comments that helped me consider issues in new ways. Bill Clark taught me a great deal about how to approach grad school and political science and offered useful scrutiny. Jasen Castillo offered helpful comments and pushed me to clarify the policy implications of the research. The Department of Political Science at Texas A&M also deserves acknowledgement and thanks. Participants in several internal workshops provided useful feedback. My special thanks to Molly Berkemeier, Florian Hollenbach, Alejandro Medina, Austin Mitchell, Ben Peterson and Carlisle Rainey for productive conversations. Social scientists outside of Texas A&M offered generous support for this project. Caroline Hartzell encouraged me to pursue graduate study in political science. I benefited from comments at the 2019 Texas Triangle IR Conference, the 2019 ISA Meeting, and the 2019 Peace Science Society (International) Annual Meeting. Benjamin Fordham, Paul Hensel, Ashley Leeds, Erik Lin-Greenberg, and Paul Poast provided especially useful criticisms and suggestions. Participants in the 2018-2019 Oskar Morgenstern Fellowship at the Mercatus Center also engaged with several extensions of the project, especially the public goods paper. I owe a great deal to my family. My parents, John and Mary supported my lifelong interest in history, politics and economics, and taught me the value of hard work and persistence. My grandparents also provided encouragement, not least by asking when I would finish my disserta- tion. This dissertation is dedicated to my grandmother, Mary Ann Baner, who was an exceptional teacher and academic pioneer. My siblings John and Phebe also offered regular and often timely support. Sarah, my wife, entered the picture later in graduate school and provided support, love and encouragement to finish well. Finally and most importantly: Soli Deo Gloria. v CONTRIBUTORS AND FUNDING SOURCES Contributors This work was supported by a dissertation committee consisting of Professor Matthew Fuhr- mann [advisor], Professor Hyeran Jo and Professor William Roberts Clark of the Department of Political Science and Professor Jasen Castillo of the Bush School of Government and Public Ser- vice. All other work conducted for the dissertation was completed by the student independently. Funding Sources Graduate study was supported by a stipend from Texas A&M University, and a research grant from the Department of Political Science. vi NOMENCLATURE NATO The North Atlantic Treaty Organization vii TABLE OF CONTENTS Page ABSTRACT ......................................................................................... ii DEDICATION ....................................................................................... iv ACKNOWLEDGMENTS .......................................................................... v CONTRIBUTORS AND FUNDING SOURCES ................................................. vi NOMENCLATURE ................................................................................. vii TABLE OF CONTENTS ........................................................................... viii LIST OF FIGURES ................................................................................. x LIST OF TABLES................................................................................... xiii 1. INTRODUCTION............................................................................... 1 1.1 Plan of the Dissertation ................................................................... 4 2. REASSESSING THE PUBLIC GOODS THEORY OF ALLIANCES ...................... 7 2.1 Model Misspecification: GDP and Defense Burdens ................................... 10 2.2 Free-Riding in Alliances.................................................................. 14 2.3 Testing the Public Goods Logic .......................................................... 15 2.3.1 Results ............................................................................ 18 2.4 Conclusion ................................................................................ 21 3. ALLIANCE PARTICIPATION, TREATY DEPTH AND MILITARY SPENDING ........ 23 3.1 Do Alliances Increase or Decrease Military Spending?................................. 25 3.1.1 Mixed Evidence .................................................................. 26 3.2 Argument .................................................................................. 27 3.2.1 Cooperation in Alliances ........................................................ 28 3.2.2 Alliance Treaty Depth ........................................................... 32 3.3 Research Design .......................................................................... 36 3.3.1 Measuring Alliance Treaty Depth ............................................... 36 3.3.2 Estimation: Multilevel Model ................................................... 40 3.3.2.1 Model Specification .................................................. 42 3.3.3 Sample and Key Variables ....................................................... 44 viii 3.4 Results ..................................................................................... 46 3.5 Discussion and Conclusion ............................................................... 50 4. DEMOCRACY AND ALLIANCE TREATY DEPTH........................................ 54 4.1 Argument .................................................................................. 57 4.1.1 Democratic Alliance Membership and Treaty Design ......................... 60 4.2 Research Design .......................................................................... 64 4.2.1 Estimation Strategy .............................................................. 67 4.3 Results ..................................................................................... 69 4.3.1 Elections, Political Competition and Executive Constraints ................... 73 4.3.2 NATO Treaty Design............................................................