Military Spending and Personnel Dynamics: A Panel Data Analysis of NATO Members

This study examines the relationship between public defense expenditures and military personnel levels across 28 NATO countries from 2000 to 2021. Using fixed-effects panel regressions, we assess how total and disaggregated military spending—covering personnel, equipment, infrastructure, and other categories—affects both total armed forces (including civilians) and active military personnel. The analysis controls economic and demographic factors such as GDP (PPP), population, and net migration. Results show that increases in personnel and infrastructure spending are positively associated with defense-sector employment, particularly among active military personnel. In contrast, equipment and other expenditures show limited effects. GDP (PPP) and net migration are negatively associated with military staffing, suggesting that economic development and labor mobility may reduce the attractiveness or necessity of military employment. These findings offer evidence for more targeted and efficient defense budgeting to support sustainable military workforce planning.