Arms production, national defense spending and arms trade: Examining supply and demand

Abstract

Scholars have estimated demand functions for national defense spending and investigated international arms trade for a long time. The relationship between supply and demand for military goods has, however, only been examined on aggregate level or in formal models yet. I investigate how the supply of military goods by arms-producing companies and the demand for military goods by both the national government and foreign governments are related by using a panel of up to 195 arms-producing companies in 21 countries for the period 2002-2016. The results show that if the demand for national defense spending increases by 1%, the arms sales by a country's largest arms-producing companies increase by up to 1.2%. If exports of major conventional weapons increase by 1%, sales increase by up to 0.2%. Arms imports do not affect domestic arms sales because imported and domestically produced arms are complements, and countries mainly import those arms they do not produce themselves. Country-specific estimation results suggest that differences among countries in geopolitical conditions and international relations determine whether a country's arms industry serves economic rather than security purposes.

Democracy’s third wave and national defense spending

“…On the other hand, defense spending is one element of government spending and reveals different preferences for public spending between democracies and autocracies. National defense spending is, in turn, likely to give rise to indirect effects because it has been shown that defense spending affects other economic variables like economic growth (Dunne et al 2005, Alptekin andLevine 2012), debt (Dunne et al 2004) or productivity (Caruso and Francesco 2012) as well as national arms production (Blum 2019). This paper contributes to the literature on how political institutions influence national defense spending.…”

Arms imports in the wake of embargoes

“…As such, we hope that our research offers a tool that can help raise red flags for follow-up investigations. At the same time, this work has important implications for our understanding of the international arms trade (see, e.g., Kinsella, 2011;Comola, 2012;Bove et al, 2014;Akerman and Seim, 2014;Kinne, 2016;Bove et al, 2018;Thurner et al, 2019;Blum, 2019;Mehrl and Thurner, 2020), states' compliance with arms export-control mechanisms (see, e.g., Brzoska, 1991Brzoska, , 2008Moore, 2010;Erickson, 2015), and the role of international institutions in monitoring and enforcing sanctions (see, e.g., Morrow, 1994;Rosand, 2004;DeMeritt, 2012;Erickson, 2020), with likely key implications for scholars and policymakers alike.…”

Positions and prospects of Russian shipbuilding in the world market of naval equipment

“…A relatively small number of countries, mostly large and developed one which have been producing arms for years, not only provide for their military industrial complex but also export a significant share of defense products to the global market. Besides, arms sales allow them to lower the cost of their own production and reimburse a part of defense-related expenses [2][3].…”