Industrial policies in the defense sector
In: Handbook of Defense Economics
Voluntary military alliances, such as NATO, are often criticized for failing to exploit the opportunities for equipment standardization and free trade. However, nationalism means that governments adopt a variety of industrial policies for purchasing defense equipment, leading to departures from the competitive free trade model. Different procurement policies offer varying combinations of military and national economic benefits. Work sharing can be achieved through international collaboration, licensed production and offsets. Policies designed to improve efficiency in equipment procurement also affect the military production function. Job losses associated with the closure of military bases and defense plants raise issues of conversion.
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