The effect of arms exports on defense budgets: A preliminary examination

This dissertation examines arms exports and national level macroeconomic measurements to ascertain whether there are quantifiable relationships. Do arms exports have an effect on the economic well being of the country as measured by the total national export output and the defense budget?; The literature examining the arms trade emphasizes political, economic, and even military reasons for exporting arms. Man has manufactured and traded arms since the beginning of time. Historical examination suggests that primary motive for trading arms was economic. That motivation shifted during the 20th-century to political. This study seeks to determine whether the political motivation for exporting arms remains, or whether it has shifted back to economic.; The defense industry is unique because the national governments of the major industrial producers are both the regulators and the consumers of the products produced in their countries. In all cases, governments are also the only consumers of the products produced.; The US Department of State's Arms Control and Disarmament Agency supplied the data for this study. The data come from the World Military and Arms Transfers (WMEAT) database, and are in constant 1999 dollars.; The first analysis measured the relationship of arms exports to total exports. The analysis attempted to measure the effects of the Cold War as well. One of the more interesting findings of this analysis is that effect. It appears that making a distinction between the Cold War and the post-Cold War era provides different perspective in examining the data.; The second analysis measured the relationship between measures of arms exports and military expenditures. This particular analysis focused on the relationship of the variables rather than seeking to determine specific impacts of arms exports on defense budgets. The results of the analysis suggest the relationship holds for the Cold War period, but falls off in the post-Cold War era.; Future research should focus on the fact that very few countries have the resources to effectively develop technology across the spectrum of threats. Using economic principles, the major defense industrial powers have probably developed comparative advantage in some specific products. An investigation of this comparative advantage would help to further explain the effect of economics on arms transfers.