The Arms Industry, Procurement and Industrial Policies
AbstractWeapons programs are criticized for cost overruns, delays in delivery and failure to meet their operational requirements. Critics focus on the power and influence of the military-industrial-political complex. This chapter addresses these controversial areas involving arms industries, alternative procurement policies and industrial policy. Arms industries are defined and statistics are presented on the world's arms industries. They can be analyzed as economically strategic industries where both R&D and production quantities are important and lead to decreasing cost industries reflecting economies of scale and learning. A structure-conduct-performance approach is applied. Market conduct is assessed including defense R&D and the role of the military-industrial-political complex. Market performance is reviewed by assessing contract performance, firm productivity and profitability and exports. Governments are central to understanding arms markets and weapons procurement raises both theory and policy issues. There are principal-agent problems and issues of adverse selection, moral hazard, risk sharing and bilateral monopoly. Various types of contract are available, each with different efficiency incentives. Governments can also use their buying power to determine the size, structure and performance of a nation's defense industrial base (DIB). The benefits and costs of a national DIB are assessed and three policy issues and challenges are reviewed. These are the role of competition in arms procurement, its extension to military outsourcing and the profitability of non-competitive contracts. Alternative industrial policies are a further aspect of procurement policy. Guidelines for a defense industrial policy in a military alliance are outlined together with an assessment of European collaborative programs. The Chapter concludes by speculating on the future of the defense firm and proposing an agenda for future research in the field.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
This chapter was published in:
This item is provided by Elsevier in its series Handbook of Defense Economics with number 2-33.
Contact details of provider:
Web page: http://www.elsevier.com/wps/find/bookseriesdescription.cws_home/BS_HE/description
Defense in a Globalized World;
Find related papers by JEL classification:
- H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Susan Guthrie & James R. Hines, Jr., 2008.
"U.S. Defense Contracts During the Tax Expenditure Battles of the 1980s,"
NBER Working Papers
14146, National Bureau of Economic Research, Inc.
- Susan J. Guthrie & Hines, James R. Jr., 2011. "U.S. DEFENSE CONTRACTS DURING THE TAX EXPENDITURE BATTLES OF THE 1980s," National Tax Journal, National Tax Association, vol. 64(2), pages 731-51, June.
- Economou, Emmanouel/Marios/Lazaros & Metaxas, Theodore, 2011. "EU and US security policy from the cold war era to the 21st century: the institutional evolution of cfsp and the factors that determine the American military supremacy," MPRA Paper 41003, University Library of Munich, Germany, revised 2011.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If references are entirely missing, you can add them using this form.