WHO IS THE ENEMY?

We examine who benefits when there is a strong leader in place, and who benefits when a situation lacks a proper leader. There are fractious terrorist groups who seek to serve the same people in common cause against a common enemy. The groups compete for rents obtained from the public by engaging in actions against the common enemy. We determine the leadership structure under which each group is better off, as well as the circumstance that the common enemy prefers. We are able to state simple and general conditions for each group and the common enemy to benefit.     

ECONOMIC GROWTH AND VIOLENT INTERNATIONAL CONFLICT: 1875–1999

This paper extends the joint product model of military alliances to apply to the new strategic doctrine adopted by NATO in the 1990s. In particular, a choice must be made between protecting one's own territory and pooling forces for an alliancewide rapid reaction force. This new model accounts for a host of externalities and their implications for burden sharing, full financing, and allocative efficiency. The Pigouvian taxes that adjust for force thinning and attack deflection are shown to finance optimal border‐protecting forces under a variety of circumstances. Second‐best considerations arise owing to the pure publicness of rapid reaction forces. The ideal toll arrangement does not currently characterize NATO financing, nor is it likely to do so.     

THE F‐35 JOINT STRIKE FIGHTER AS A SOURCE OF INNOVATIon AND EMPLOYMENT: SOME INTERIM RESULTS

The F‐35 Joint Strike Fighter (JSF) programme is important for innovation in the Dutch economy and also contributes to other programmes in the aerospace industry (spin‐off) and other industries (spillover). On top of the expected value of US$9.2 billion in development and production, based on interviews with 10 companies and research institutes, an expected spin‐off of US$1.1 billion and an expected spillover of US$120 million will result. In addition, over 23,000 man‐years are associated with the activities in the development and production of the JSF. This study excludes the large and labour‐intensive Maintenance, Repair and Overhaul (MRO) activities. Further validation of data and an update of current results is planned for 2006.     

Estimating non‐transparent military expenditures: The case of china (PRC)∗

Data limitations arising from non‐transparency in military expenditure reporting impose significant constraints on economists studying country and comparative developments in this field. This article focuses on the case of China. It reviews the recent literature on China's military expenditure, examines the variance in published estimates, and identifies three factors which help explain the variance: budgetary falsification; non‐budgeted PLA revenue; and the US dollar purchasing‐power parity of the yuan. Conclusions emphasize important policy implications of such variance and suggest a more active role for defence economists in a field of research generating considerable attention from international relations scholars.     

Estimating defence budget saving from disarmament: the United States’ case

Probing the technology in the production of US national defence by using a dynamic cost‐function model with adjustment costs, this paper evaluates the effect of reducing the level of national defence on the defence budget saving. Our inquiry involves estimating the defence production structure without output data for non‐market goods that are normally unavailable. Our findings include: (i) the United States behaves rationally to minimize cost in the production of national defence; (ii) the adjustment costs are larger in disarmament than in military build‐up; (iii) due to the adjustment costs peculiar to disarmament, the defence budget saving from disarmament appears small, but cutbacks allow great savings on the defence budget.     

TIME-VARYING CHARACTERISTICS OF SOUTH KOREA-UNITED STATES AND JAPAN-UNITED STATES MILITARY ALLIANCES UNDER CHINESE THREAT: A PUBLIC GOOD APPROACH

This paper investigates the nature of two military alliances under Chinese threat. The findings are as follows: First, South Korea does not consider China a significant threat while Japan and the United States have recognized China as a serious threat since the 1990s and the 2000s, respectively. Second, the relationship between South Korea and the United States is a true military alliance for all time periods, but the nature of the alliance has changed since the 1970s. Third, although Japan began to form an alliance relationship with the United States in the 1990s, Japan is considered a more significant ally by the United States. This paper implies that, should China provoke a military confrontation, it might be difficult to deduce a common solution among the three countries because of the different response to military threats from China.     

Concept costing for defence projects: the problem and its solution

It is intrinsic to the nature of military competition that the unit acquisition costs of defence systems rise generation by generation. Traditional “bottom‐up” methods of cost‐estimating cannot meet the increasing demands for extensive studies of many options before commencing design and, while “top‐down” estimating techniques are an improvement, in particular by reducing the time required for preparing estimates, they also are inadequate to meet current requirements. A new method has been devised, therefore, further developing “top‐down” methods using Bayesian techniques to make best use of the available information, whether certain or uncertain, and its accuracy established by example.     

“Government contracting options: A model and application“∗

This paper models and simulates a government‐contractor principal‐agent weapon system repair model. Insights are derived as to how government repair contracts should be constructed so as to induce optimal contractor behavior. The paper's general conclusion is that the best contracting approach combines a lump‐sum payment that does not vary with the number of units repaired, expensive item cost‐sharing, and a contractor‐provided availability guarantee. Provided there is intercontractor competition, this type of contract performs well even if the government is poorly informed about weapon system break patterns or repair costs.     

Democracy and peace: Reply to oneal and russett

The criticism of James, Solberg and Wolfson (JSW) (1999) by Oneal and Russett (OR) is not responsive to the methodologica] issues at stake. JSW argued that war is an endogenous feature of the world political and economic system. If its causes are to be measured, it must be as a structural equation in a simultaneous system. Wedded to the idea that “democracies never fight each other,” OR rely on a single equation to justify their view. JSW claim that such an equation may be an ad hoc reduced form with no causal implications unless the equation is explicitly identified as a structural equation. JSW expand the model to explain democracy and conflict as two endogenous variables. JSW do not claim to have discovered the true relationships between these variables by their minimal expansion of the structural relation. They do show that unless these (and other) variables are treated as part of a system, the results are unstable, contradictory, of minimal size and not a reliable guide to public policy.     

DEFENSE SPENDING AND ECONOMIC GROWTH IN TURKEY: A LINEAR AND NON‐LINEAR GRANGER CAUSALITY APPROACH

This paper uses linear and non‐linear Granger causality methods to determine the causal relationship between defense spending and economic growth in Turkey for the period 1949–2004. The innovative feature of this paper is that it provides evidence regarding the nonlinear causal dependence between military spending and economic growth in Turkey. The empirical results contribute to the empirical literature by indicating support for both linear and non‐linear causality between military expenditures and economic development and they may prove useful in theoretical and empirical research by regulators and policy makers.