AN ENDOGENOUS GROWTH MODEL OF CAPITAL AND ARMS ACCUMULATION

This paper attempts to examine the effect of an anticipated foreign military threat on the steady‐state growth rate and the transitional behavior of the economy. The modeling strategy follows the Sandler and Hartley (1995 Sandler, T. and Hartley, K. 1995. The Economics of Defense, Cambridge: Cambridge University Press.  [Google Scholar]) and Dunne et al. (2005 Dunne, J.P., Smith, R.P. and Willenbockel, D. 2005. Models of military expenditure and growth: a critical review. Defence and Peace Economics, 16: 449–461. [Taylor & Francis Online], [Web of Science ®] , [Google Scholar]) viewpoints to emphasize the role of national defense in affecting growth from the perspective of both the demand and the supply sides. We thus combine the public capital version of endogenous growth with a framework of competitive arms accumulation. It is found that the key factor determining the steady state and the transitional effects of a rise in the foreign military threat on the home weapon–capital ratio, the consumption–capital ratio, and the rate of economic growth, is the degree of relative risk aversion.     

THE EFFECTS OF THE WORLD DEFENSE INDUSTRY AND US MILITARY AID TO ISRAEL ON THE ISRAELI DEFENSE INDUSTRY: A DIFFERENTIATED PRODUCTS MODEL

This paper models the interactions between the defense industry market structure and the defense needs of Israel, the USA and Western Europe, which produce several heterogeneous defense goods. The model specifies that the defense industries of the US and Europe are ‘large’ while that of Israel is ‘small’. The US military aid to Israel is also an integral part of the model. The results show that net defense costs of Israel are minimal when the number of its defense firms is one. The model predicts that an increase in US military aid reduces Israel’s government expenditure, its defense industry’s profits and its net defense costs.     

The case for demilitarising Lesotho

ABSTRACT

The Kingdom of Lesotho spends around five per cent of its annual budget – some 700 million Maloti ($US52.6 million) in 2017 – on the Lesotho Defence Force (LDF). Lesotho’s geographical position means that the LDF has no meaningful role regarding its primary function of defending the country from external aggression and it hardly engages in its secondary functions. In addition, the LDF has a long history of interference with democratic processes and engaging in human rights abuse. The financial resources currently allocated to the LDF could do far more for security, widely defined, if they were allocated to a number of other government expenditure categories.     

From combat to non-combat action

This paper examines the rationale and centrality of private military and security companies (PMSCs) in humanitarian assistance operations in Sudan, asking why PMSCs are involved in humanitarian assistance operations in Sudan and what the principles underlying their activities are. To answer this question, the paper draws attention to the link between humanitarian crises and PMSC interventions. Where there is no meaningful alternative intervention, undergirded by humanitarian concerns that are also profit driven, PMSCs come in to provide the needed services. The protracted and complicated internal armed conflicts in Sudan, which have lasted for over two decades, have produced as many as 4,8 million internally displaced persons (IDPs) – the single largest number in the world. The kind of humanitarian assistance operations provided by PMSCs in Sudan have become critical to the provision of much-needed services which were inadequately provided by governmental authorities at both unilateral and multilateral levels. This paper argues that the humanitarian crises in Sudan created a regime that permits humanitarian assistance operations by both state and non-state actors.     

Compensating military veterans in South Africa

This article outlines the widespread needs of South African military veterans and the possible consequences if the promises made in the recent Military Veterans Act are not met. The first part of the article defines who generally qualifies as a military veteran, how they are typically compensated in various countries with specific reference to neighbouring southern African countries, and what the consequences are when veterans become disenchanted with the state. The second part focuses on South Africa and the recent debates on military veterans and their entitlements. With reference to the findings of a qualitative study conducted among military veterans, parliamentary debates and media reports, an assessment is made of the demands and affordability of promised benefits and the consequences should the state not deliver. The conclusion is reached that heightened expectations are presently frustrated by slow roll-outs, and this is likely to increase the possibility of protest action. This has now the potential to create further tension within the ruling party and civil society, as the pressure on public finances mounts and demands become unsustainable. The effect this may have on political stability will depend on how the government manages this issue.     

Defence spending and growth in turkey 1954–1993: A causal analysis

This paper investigates the causality issue between military expenditure and growth in the case of Turkey, a strategically located developing country, for the period 1954–1993. Results reported herein reveal the absence of any causal ordering between the variables in question.     

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.     

Country survey IX: Spain

From the early 1980s Spain embarked on a wide‐ranging process of military reform, from organisational changes to defence industrial policies. Investment in military equipment was set to grow, policies were drawn up to foster the domestic defence industrial base, defence R&D rocketed, and Spain joined a myriad of international arms development programmes. Yet, by 1991 the process of reform had run out of steam. Expenditure planning proved unreliable, and firms suffered from sharp cutbacks in procurement expenditure. The model of defence industrial growth sketched in the mid‐1980s had floundered. The Spanish case provides an example of how the quest to maximise defence procurement from domestic sources can fall victim to industrial and budgetary constraints. Spanish defence producers are now becoming increasingly intertwined with foreign defence companies.     

Country survey X: Defence spending in Turkey

This paper provides a country survey of the Turkish defence economy. Turkey is a member of NATO alliance and is strategically located between Europe and Middle East. Moreover, Turkey has a high defence burden and high economic growth. The first part of the survey presents a brief economic background of Turkey, its armed forces, the defence industry, its modernisation and trends in Turkish defence expenditure. The rest of the paper focuses on the relationships between defence spending and economic growth. The effect of defence spending on economic growth is econometrically estimated using a supply side model. Both externality effects and the size effect of defence spending are estimated for Turkey. The study concludes that defence expenditure stimulates economic growth while externalities from the defence sector to the rest of economy are negative for Turkey.     

Externality of Defense Expenditure in the United States: A New Analytical Technique to Overcome Multicollinearity

Abstract

This study estimates a three-sector Feder–Ram model using US annual data for 1965–2014 to confirm the externality of defense expenditure in the United States. Although the model is often used in the literature to scrutinize whether this effect exists, a flaw intrinsic to this model is the appearance of multicollinearity. In this study, I introduced novel techniques, namely: the standardization and estimation of a simple slope, to estimate the model. The results are as follows. First, I prove that the multicollinearity problem can be resolved by standardization. Second, externality, which is judged to conventionally exist, is not found. Third, increases in defense expenditure bring about positive but limited economic growth when the ratio of private to defense expenditure in the previous year ranges from 5.09 to 6.82%. By re-estimating the model, this study contributes to developing the Feder–Ram model within the related literature.