The Determinants of Arms Production

Abstract

This study analyzes the determinants of arms production in 15 countries using annual panel data from 1997 to 2002. The results suggest that real GDP per capita, military expenditures, arms exports, and arms imports are positively related to arms production.

Keywords:

• Arms production
• Military spending
• Panel data

JEL Codes:

• L64
• E2
• C23

Acknowledgements

The authors sincerely thank Professor Ron Smith from Birkbeck University of London for his constructive criticism and helpful comments on the paper and an anonymous referee of this journal for constructive suggestions and comments on previous versions of this paper. The authors also thank the participants of the Fourteenth Annual Conference on Economics and Security held on 17–18 June 2010, at İzmir-Turkey for their comments and suggestions.

Notes

1 Detailed literature analysis can be found in literaturematic.com and Yesilyurt and Yesilyurt and Yesilyurt (forthcoming).

2 Q, X and M were taken from INDSTAT4, Industrial Statistics Database, MILEX and GDPPC were taken from www.sipri.com

3 In the literature, offset agreements and the cost-benefit relationships of these agreements have been analyzed. The investigations that have conducted these analyses include studies by Matthews (1996), Antonakis (1996), Chinworth and Matthews (1996). However, this aspect of offset agreements has not been addressed in this paper because it is beyond this study.