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Capital-Labour Substitution In Uk Armed Forces

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  • Peter Macdonald

Abstract

This paper estimates the elasticity of substitution (σ) between military personnel and other military inputs, building on a study by Ridge and Smith published in 1991. The major difference is that this paper uses data on the average military wage, which Ridge and Smith did not, allowing a much more flexible specification of both the demand and supply equations. Accounting for a structural break at the end of the Cold War, it finds σ likely to be some small positive number, much lower than previous estimates suggest.

Suggested Citation

  • Peter Macdonald, 2006. "Capital-Labour Substitution In Uk Armed Forces," Defence and Peace Economics, Taylor & Francis Journals, vol. 17(2), pages 141-153.
  • Handle: RePEc:taf:defpea:v:17:y:2006:i:2:p:141-153 DOI: 10.1080/10242690500512236
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    References listed on IDEAS

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    1. S. Illeris & G. Akehurst, 2001. "Introduction," The Service Industries Journal, Taylor & Francis Journals, pages 1-4.
    2. Wooldridge, Jeffrey M., 1990. "A note on the Lagrange multiplier and F-statistics for two stage least squares regressions," Economics Letters, Elsevier, vol. 34(2), pages 151-155, October.
    3. Phillips, P.C.B., 1983. "Exact small sample theory in the simultaneous equations model," Handbook of Econometrics,in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 1, chapter 8, pages 449-516 Elsevier.
    4. Warner, John T., 1995. "The economics of military manpower," Handbook of Defense Economics,in: Keith Hartley & Todd Sandler (ed.), Handbook of Defense Economics, edition 1, volume 1, chapter 13, pages 347-398 Elsevier.
    5. Peter Kennedy, 2003. "A Guide to Econometrics, 5th Edition," MIT Press Books, The MIT Press, edition 5, volume 1, number 026261183x, January.
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    Cited by:

    1. MacDonald, Peter, 2013. "Labour substitution and the scope for military outsourcing," MPRA Paper 46688, University Library of Munich, Germany.

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