Measuring defense conversion in Russian industry

This paper develops and implements a methodology for quantifying defense conversion in Russian manufacturing in the early 1990s. A two‐sector, three‐good model is employed to analyze the flows of resources from military to non‐military uses and applied to firm‐level survey data under alternative definitions of military production and the MIC. An aggregation framework is constructed to estimate the total quantity and change in Russian military production, the latter decomposed into intrafirm and intersectoral resource reallocation and overall industrial decline. Although there is evidence of substantial decline in military production, the data show little reallocation to productive civilian uses, neither within the MIC nor to other manufacturing sectors.     

Comment: Why “an identified systemic model of the democracy‐peace nexus” does not persuade*

In their article in this journal, James, Solberg and Wolfson (1999) challenge our findings that two states are more likely to have peaceful relations if they are both democratic. They claim to develop a simultaneous system of two equations showing that peace and democracy foster each other, and that the effect of peace in encouraging democracy is stronger than that of democracy on peace. Their analysis, however, is flawed. Their research design employs measures of dispute and joint democracy that are inferior to those now common in the literature, and their equation for predicting peace is not properly specified. These problems distort their results. Even so, their results provide evidence of the pacific benefits of democracy. Analyses we conduct with a more completely specified model reveal stronger support for the democratic “ peace. Furthermore, a test of the effect of interstate conflict on democracy should be done at the national (or monadic) level of analysis; but James et al. perform a dyadic analysis. In a monadic test using vector autoregression, we find that disputes make no contribution to explaining the character of regimes. Even with their dyadic method, their finding that peace promotes democracy is not robust Including a crucial control variable, the ratio of militarily relevant national capabilities, that James et al. omitted, dramatically alters their findings.     

The causal nexus between military spending and unemployment in the G7: a bootstrap panel causality test

We revisit the causal relationship between military spending and unemployment in the G7 countries applying a bootstrap panel causality analysis that accounts for both cross-sectional dependence and for heterogeneity across countries. Using per capita real GDP as a controlled variable, we found a unidirectional causality running from military spending to unemployment for Canada, Japan, and the US, one-way causality running from unemployment to military spending for France and Germany, and bidirectional causality for Italy and the UK. The empirical evidence does not seem to provide consistent results regarding the causal relationship between military spending and unemployment in G7 countries.     

Optimal patrol to uncover threats in time when detection is imperfect

Consider a patrol problem, where a patroller traverses a graph through edges to detect potential attacks at nodes. An attack takes a random amount of time to complete. The patroller takes one time unit to move to and inspect an adjacent node, and will detect an ongoing attack with some probability. If an attack completes before it is detected, a cost is incurred. The attack time distribution, the cost due to a successful attack, and the detection probability all depend on the attack node. The patroller seeks a patrol policy that minimizes the expected cost incurred when, and if, an attack eventually happens. We consider two cases. A random attacker chooses where to attack according to predetermined probabilities, while a strategic attacker chooses where to attack to incur the maximal expected cost. In each case, computing the optimal solution, although possible, quickly becomes intractable for problems of practical sizes. Our main contribution is to develop efficient index policies—based on Lagrangian relaxation methodology, and also on approximate dynamic programming—which typically achieve within 1% of optimality with computation time orders of magnitude less than what is required to compute the optimal policy for problems of practical sizes. © 2014 Wiley Periodicals, Inc. Naval Research Logistics, 61: 557–576, 2014