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Random coefficients models of arms imports

  • Smith, Ron P.
  • Tasiran, Ali

This paper uses a large panel of data with up to 19 time-series observations for almost 150 countries to estimate models of arms imports. Qualitative evidence suggests a non-linear relationship. As income and military expenditure grow, the propensity to import first rises and then falls as a domestic arms industry develops. We face the difficulty that there is virtually no data on domestic arms procurement or production capability. We respond to this difficulty by adopting a random coefficient approach in order to identify any systematic influences on import propensity, through the impact of military expenditure, size of the armed forces or income on unobserved domestic production capability. While a clear non-linear pattern is apparent in the cross-section relationship, once one allows for parameter heterogeneity such a pattern is not apparent in the time-series.

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Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 27 (2010)
Issue (Month): 6 (November)
Pages: 1522-1528

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Handle: RePEc:eee:ecmode:v:27:y:2010:i:6:p:1522-1528
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

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  1. M. Hashem Pesaran & Takashi Yamagata, 2005. "Testing Slope Homogeneity in Large Panels," CESifo Working Paper Series 1438, CESifo Group Munich.
  2. Pesaran, M. Hashem & Smith, Ron, 1995. "Estimating long-run relationships from dynamic heterogeneous panels," Journal of Econometrics, Elsevier, vol. 68(1), pages 79-113, July.
  3. Baltagi, Badi H. & Griffin, James M., 1997. "Pooled estimators vs. their heterogeneous counterparts in the context of dynamic demand for gasoline," Journal of Econometrics, Elsevier, vol. 77(2), pages 303-327, April.
  4. International Monetary Fund, 1999. "Neglected Heterogeneity and Dynamics in Cross-Country Savings Regressions," IMF Working Papers 99/128, International Monetary Fund.
  5. Swamy, P A V B, 1970. "Efficient Inference in a Random Coefficient Regression Model," Econometrica, Econometric Society, vol. 38(2), pages 311-23, March.
  6. Paul Levine & Fotis Mouzakis & Ron Smith, 1998. "Prices and quantities in the arms trade," Defence and Peace Economics, Taylor & Francis Journals, vol. 9(3), pages 223-236.
  7. Christian Dustmann & Mar´┐Ża Engracia Rochina-Barrachina, 2007. "Selection correction in panel data models: An application to the estimation of females' wage equations," Econometrics Journal, Royal Economic Society, vol. 10(2), pages 263-293, 07.
  8. Hall, Stephen G. & Hondroyiannis, George & Swamy, P.A.V.B. & Tavlas, George S., 2009. "Assessing the causal relationship between euro-area money and prices in a time-varying environment," Economic Modelling, Elsevier, vol. 26(4), pages 760-766, July.
  9. Brauer, Jurgen, 2007. "Arms Industries, Arms Trade, and Developing Countries," Handbook of Defense Economics, Elsevier.
  10. Garcia-Alonso, Maria D.C. & Levine, Paul, 2007. "Arms Trade and Arms Races: A Strategic Analysis," Handbook of Defense Economics, Elsevier.
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