The Political Economy of Scandinavian Neutrality.

This article examines whether three of the neutral nations of Europe (i.e., Sweden, Switzerland, and Finland) have adhered to their choice of armed neutrality by being self-reliant on their own defenses. Using a joint product model, we specify a reduced-form equation for a nation's demand for military expenditures. Our empirical estimates of these demands suggest that Sweden free rode on NATO after institution of the doctrine of flexible response; however, the other two neutral nations have been self-reliant throughout the period 1957-82. In the case of Sweden, the traditional assumption of no interalliance spillovers does not hold. With pooled data, cross-equation restrictions highlight the essential differences between NATO and nonaligned Scandinavian countries. [ABSTRACT FROM AUTHOR]