The Economics of the International Arms Trade
AbstractSales of arms are a significant component of international trade and raise a range of pressing policy issues. After a short review of the market, this paper provides a formal model of the trade which allows for competing, forward-looking suppliers whose welfare depends on both the economic benefits from the sales and the security repercussions of recipient behaviour. The recipient's behaviour depends on their military capability which is a function of the stock of arms they have acquired. We first examine myopic recipients, whose behaviour depends on current stocks, then forward-looking recipients for whom questions of the time-consistency and the credibility of supplier threats to embargo, or promises to resupply become crucial. Finally, we examine the impact of supplier cooperation of the sort currently being discussed in the UN Security Council.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 770.
Date of creation: Mar 1993
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Find related papers by JEL classification:
- D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
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- Benny Mantin & Asher Tishler, 2004. "The structure of the defense industry and the security needs of the country: a differentiated products model," Defence and Peace Economics, Taylor & Francis Journals, vol. 15(5), pages 397-419.
- Yoad Shefi & Asher Tishler, 2005. "The Effects Of The World Defense Industry And Us Military Aid To Israel On The Israeli Defense Industry: A Differentiated Products Model," Defence and Peace Economics, Taylor & Francis Journals, vol. 16(6), pages 427-448.
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