Not Just Pooling, but Helping Generate Capabilities Alliances and Capability Growth

Abstract

This study explores sequential effects between alliances and member states’ capability growth. It argues that alliances have the effect of increasing member states’ economic and military capability growth. Alliances help member states reallocate their domestic resources more efficiently by providing security support. The improved efficiency of resource allocation has a positive effect on the economic growth of member states. In addition, alliances also increase international trade between member states, which has a positive effect on member states’ economic growth. Hence, alliances have a positive impact on the economic growth of member states through improving domestic resource reallocation and increasing trade. This economic growth, in turn, encourages member states to increase military spending without harming the efficiency of resource allocation in the long term. Alliances thus have direct and indirect positive effects on member states’ economic growth and increases in military spending. Empirical tests provide supportive evidence for this claim.