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The evolution of concentration in the arms market

Author

Listed:
  • J. Paul Dunne

    () (Department of Economics, University of Cape Town, South Africa)

  • Ron P. Smith

    () (Economics, Department of Economics, Mathematics, and Statistics, Birkbeck College, University of London)

Abstract

This article examines the evolution of concentration in the global arms market, or industry, over the period 1990-2013 and considers its prospects. Using data from the Stockholm International Peace Research Institute (SIPRI) list of the largest 100 arms producing firms, it finds that within the international arms industry, there has been change but also continuity, particularly in the nature of the markets and the relations between the main producers and governments. While the changes that have taken place are important, it is still political rather than economic logic that shapes the evolution of the market. Certainly the arms industry remains relatively unconcentrated compared to other industries probably because of the domestic preferences in procurement by national governments. Countries do not like monopoly arms producers, but there is no western country other than the United States that can currently support more than one competitor, although in the near future Russia could and China may provide serious international competition to the U.S. What is clear is that there are economic forces pushing for increased competition, but the final outcome will be determined by political forces, and transparency and governance will become increasingly important issues.

Suggested Citation

  • J. Paul Dunne & Ron P. Smith, 2016. "The evolution of concentration in the arms market," Economics of Peace and Security Journal, EPS Publishing, vol. 11(1), pages 12-17, April.
  • Handle: RePEc:epc:journl:v:11:y:2016:i:1:p:12-17
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    References listed on IDEAS

    as
    1. Xavier Gabaix & Rustam Ibragimov, 2011. "Rank - 1 / 2: A Simple Way to Improve the OLS Estimation of Tail Exponents," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 29(1), pages 24-39, January.
    2. Keith Hartley & Todd Sandler (ed.), 2007. "Handbook of Defense Economics," Handbook of Defense Economics, Elsevier, edition 1, volume 2, number 1.
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    4. Ron P. Smith, 2013. "The defense industry in an age of austerity," Economics of Peace and Security Journal, EPS Publishing, vol. 8(1), pages 18-22, April.
    5. Paul Dunne & Maria del Carmen Garcia-Alonso & Paul Levine & Ron Smith, 2007. "Determining The Defence Industrial Base," Defence and Peace Economics, Taylor & Francis Journals, vol. 18(3), pages 199-221.
    6. Xavier Gabaix, 2016. "Power Laws in Economics: An Introduction," Journal of Economic Perspectives, American Economic Association, vol. 30(1), pages 185-206, Winter.
    7. Erzo G. J. Luttmer, 2007. "Selection, Growth, and the Size Distribution of Firms," The Quarterly Journal of Economics, Oxford University Press, vol. 122(3), pages 1103-1144.
    8. Brauer, Jurgen, 2007. "Arms Industries, Arms Trade, and Developing Countries," Handbook of Defense Economics, Elsevier.
    9. Smith, R. P., 1990. "Defence procurement and industrial structure in the U.K," International Journal of Industrial Organization, Elsevier, vol. 8(2), pages 185-205, June.
    10. Raul Caruso & Andrea Locatelli, 2013. "Company Survey Series Ii: Finmeccanica Amid International Market And State Control: A Survey Of Italian Defence Industry," Defence and Peace Economics, Taylor & Francis Journals, vol. 24(1), pages 89-104, February.
    11. Ron Smith, 2001. "The International Arms Industry Since the End of the Cold War," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 2(3), pages 155-166, July.
    12. Gabaix, Xavier & Ibragimov, Rustam, 2011. "Rank − 1 / 2: A Simple Way to Improve the OLS Estimation of Tail Exponents," Journal of Business & Economic Statistics, American Statistical Association, vol. 29(1), pages 24-39.
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    1. repec:epc:journl:v:12:y:2017:i:2:p:21-31 is not listed on IDEAS
    2. repec:bpj:pepspp:v:23:y:2017:i:2:p:14:n:5 is not listed on IDEAS

    More about this item

    Keywords

    Arms market; firm concentration; defense industry;

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War

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