Showing papers in "Defence and Peace Economics in 2010"
TL;DR: This paper explored the origins of transnational terrorist activity, from 1982 through 1997, in 118 countries and found that political rights and civil liberties mitigate the terrorism-producing effects of ethnic tensions, while economic freedoms robustly reduce the number of terrorist attacks originating in ethnically tense societies.
Abstract: Using the ITERATE dataset, we explore the origins of transnational terrorist activity, from 1982 through 1997, in 118 countries. We model terrorism, not as a function of a nation’s ethnic, religious or linguistic fractionalization, but as an independent measure of perceived ethnic tensions. When we control for institutional quality, evidence that political rights and civil liberties mitigate the terrorism‐producing effects of ethnic tensions exists only since 1990. Economic freedoms, on the other hand, robustly reduce the number of terrorist attacks originating in ethnically tense societies.
139 citations
TL;DR: In this article, the authors investigated the causal relationship between defense spending and terrorism in Turkey using the Autoregressive Distributed Lag (ARDL) bounds testing procedure and Granger-causality analysis and revealed that there exists a unidirectional causality running form terrorist attacks to defense spending as expected, but not vice versa.
Abstract: The present article aims at investigating the causal relationship between defense spending and terrorism in Turkey using the Autoregressive Distributed Lag (ARDL) bounds testing procedure and Granger-causality analysis. The findings reveal that there exists a unidirectional causality running form terrorist attacks to defense spending as expected, but not vice versa. In the light of this finding it can be inferred that military anti-terrorism measures alone are not sufficient to prevent terrorism.
89 citations
TL;DR: In this article, the influence of conflict on the economies of neighbouring countries is discussed and the results from previous papers show a strong negative effect for an entire area around a country suffering from conflict, but this paper reaches a different conclusion, by using more recent data and adjusting the methodology previously employed.
Abstract: In this article, the influence of conflict on the economies of neighbouring countries is discussed. The results from previous papers show a strong negative effect for an entire area around a country suffering from conflict, but this paper reaches a different conclusion, by using more recent data and adjusting the methodology previously employed. Additionally, a new type of contiguity matrix is constructed and used in the actual analysis. The final analysis consists of a large number of regressions and concludes that conflict actually has two opposing effects. First, like conflict countries themselves, directly contiguous countries actually suffer from the negative effects of proximate conflict. Secondly, however, there is also a positive spillover of conflict, which affects non‐contiguous countries and this effect is larger for countries that are closer to the conflict country. The results from the paper predominantly hold for the most violent kind of conflict.
64 citations
TL;DR: A large literature has used tests for Granger (1969) non-causality, GNC, to examine the interaction of military spending with the economy as discussed by the authors, but these tests answer a specific though quite limited question: can one reject the null hypothesis that one variable does not help predict another? If this null is rejected, there is said to be Granger causality, GC.
Abstract: A large literature has used tests for Granger (1969) non-causality, GNC, to examine the interaction of military spending with the economy. Such tests answer a specific though quite limited question: can one reject the null hypothesis that one variable does not help predict another? If this null is rejected, there is said to be Granger causality, GC. Although the limitations of GNC tests are well known, they are often not emphasised in the applied literature and so may be forgotten. This paper considers the econometric and methodological issues involved and illustrates them with data for the US and other countries. There are three main issues. First, the tests may not be informative about the substantive issue, the interaction of military expenditure and the economy. The difficulty is that Granger causality, incremental predictability, does not correspond to the usual notion of economic causality. To determine the relationship of the two notions of causality requires an identified structural model. Second, the tests are very sensitive to specification. GNC testing is usually done in the context of a vector autoregression, VAR, and the test results are sensitive to the variables and deterministic terms included in the VAR, lag length, sample or observation window used, treatment of integration and cointegration and level of significance. Statistical criteria may not be very informative about these choices. Third, since the parameters are not structural, the test results may not be stable over different time periods or different countries.
57 citations
TL;DR: The global defense industrial sector reflects the hierarchy of power in the post-Cold War world as discussed by the authors, and the United States plays the dominant role in the defense sect, as in the larger international system.
Abstract: The global defense‐industrial sector reflects the hierarchy of power in the post‐Cold War world. As in the larger international system, the United States plays the dominant role in the defense sect...
57 citations
TL;DR: In this paper, the authors define the global economic costs of conflict and suggest two key criteria, namely comprehensiveness and consistency, which are necessary for a valid calculation of such costs.
Abstract: This paper defines the global economic costs of conflict and suggests two key criteria, namely comprehensiveness and consistency, which are necessary for a valid calculation of such costs. A critical review of the literature reveals that most studies focus on national income losses, using counterfactual regression models, finding a negative impact on growth both for conflict countries themselves and for their neighbors. However, the debate is quite fragmented and the literature fails to combine these insights in a comprehensive and consistent manner. Furthermore, there is little work thus far on integrating aggregate and micro‐level estimates of the costs of conflict.
41 citations
TL;DR: In this paper, the authors examined the impact of armed conflicts on the return and volatility of the general index of the Tel Aviv Stock Exchange (TASE), as well as on the government bond index.
Abstract: This paper addresses the issue of the impact that armed conflicts have on capital markets. It focuses on the recent Israeli military offensive in the Gaza Strip launched in late 2008 and concluded in early 2009. The paper examines the effects of this armed conflict on the return and volatility of the general index of the Tel Aviv Stock Exchange (TASE), as well as on the government bond index. Furthermore, event study methodology is applied to identify markets’ reactions to the Israeli military operations in the Gaza Strip.
39 citations
TL;DR: In this paper, a game-theoretic model of suicide terrorism is presented, where the terrorist leader, a targeted government, and potential terrorist supporters join the terrorist group if they gain more from their participation than from their economic opportunities.
Abstract: This paper presents a game‐theoretic model of suicide terrorism containing three agents: the terrorist leader; a targeted government; and potential terrorist supporters. Supporters join the terrorist group if they gain more from their participation than from their economic opportunities. Preemptive measures by the government can result in a backlash that encourages recruitment through new grievances. Suicide attacks can also lead to recruitment. Increases in preemption costs and/or economic opportunities can reduce the overall level of terrorism, while increasing the proportion of suicide to normal attacks. An increase in the effect of preemption on recruitment, or the propaganda effect of suicide bombings has the opposite effect of increasing normal and suicide attacks, but decreasing the proportion of suicide to normal attacks in the terrorist organization’s strategy profile.
37 citations
TL;DR: In this paper, the causal effect of a reduction in military personnel on a number of socioeconomic indicators within the peripheries of military bases was identified. But the authors found that these base adjustments had only a marginal impact on the local community in which the bases are located.
Abstract: We identify the causal effect of a reduction in military personnel on a number of socioeconomic indicators within the peripheries of military bases. The base realignments and closures in Germany are used as an exogenous source of variation that allows us to identify the effect of a demand shock on household income, output, unemployment, and tax revenue within a specified buffer zone around each base. The analysis covers 298 communities for the period 2003–2007. Consistent with evidence found elsewhere, we find that these base adjustments have only a marginal impact on the local community in which the bases are located.
35 citations
TL;DR: In this paper, the authors present a simple theoretical model of conflict that defines a two-sector economy, where in a contested sector, two agents struggle to appropriate the maximum possible fraction of a contestable output and in an uncontested sector, they hold secure property rights over the production of some goods.
Abstract: This paper is intended to complement the existing literature on civil wars. First, it presents a simple theoretical model of conflict that defines a two‐sector economy. In a contested sector, two agents struggle to appropriate the maximum possible fraction of a contestable output. In an uncontested sector, they hold secure property rights over the production of some goods. Agents split their resource endowment between ‘butter’, ‘guns’ and ‘ice‐cream’. Following the theoretical insights the empirical analysis focuses on the relationship between civil wars and different sectors of the economy. In particular, a panel probit specification shows that the incidence of a civil war decreases in the size of manufacturing sector.
33 citations
TL;DR: In this paper, the authors show that defence contracts have a positive effect on profits, as well as the prizes for innovation and the market power enjoyed by some defence subsectors.
Abstract: The traditional view of the defence industry obtaining large profits from contracts with the Ministry of Defence relies on several assumptions. Among these are the use of such arrangements as an instrument of industrial policy, the strong market power enjoyed by prime contractors, and the inefficiency encouraged by the sector. The findings show that defence contracts have a positive effect on profits, as well as the prizes for innovation and the market power enjoyed by some defence subsectors.
TL;DR: This paper considers the second Lancet survey of mortality in Iraq published in October 2006 and presents some evidence suggesting ethical violations to the survey’s respondents including endangerment, privacy breaches and violations in obtaining informed consent.
Abstract: This paper considers the second Lancet survey of mortality in Iraq published in October 2006. It presents some evidence suggesting ethical violations to the survey’s respondents including endangerment, privacy breaches and violations in obtaining informed consent. Breaches of minimal disclosure standards examined include non‐disclosure of the survey’s questionnaire, data‐entry form, data matching anonymised interviewer identifications with households and sample design. The paper also presents some evidence relating to data fabrication and falsification, which falls into nine broad categories. This evidence suggests that this survey cannot be considered a reliable or valid contribution towards knowledge about the extent of mortality in Iraq since 2003. Editor’s Note: The authors of the Lancet II Study were given the opportunity to reply to this article. No reply has been forthcoming.
TL;DR: In this article, an economic theory of genocide is presented with application to Rwanda•1994. The theory considers macro conditions under which an authority group chooses genocide and micro conditions that facilitate the spread of genocide.
Abstract: An economic theory of genocide is presented with application to Rwanda‐1994. The theory considers ‘macro’ conditions under which an authority group chooses genocide and ‘micro’ conditions that facilitate the spread of genocide. From the macro perspective, a bargaining model highlights four rational explanations for an authority’s choice of genocide: prevention of loss of power, indivisibility, elimination of a persistent rival, and political bias. From the micro perspective, an evolutionary game model shows how supporters of genocide gain the upper hand in group dynamics over resisters and bystanders. The theory and application suggest that the conditions for genocide are not exceptional.
TL;DR: The UK defence economy has some distinctive features as discussed by the authors, such as a nuclear capability and a high technology defence industrial base, substantial defence R&D with the UK as a major arms exporter.
Abstract: The UK defence economy has some distinctive features. Its Armed Forces have a worldwide capability reflected in modern air, land and sea forces with an expeditionary role. Its world role is further reflected in a nuclear capability and a high technology defence industrial base, substantial defence R&D with the UK as a major arms exporter. This survey focuses on the period 1970 to 2008. It explains the military‐industrial complex and estimates a demand for military expenditure function. There follows an analysis of procurement and defence industrial policy. Future policy issues are outlined, namely, the costs of the UK’s world role and its relations with European defence policy. It is concluded that the UK faces some difficult defence choices.
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TL;DR: In this article, the case for defence and is it a worthwhile investment in two contrasting nations, namely, the UK and New Zealand, is addressed for two contrasting countries, namely: the US and the UK.
Abstract: What is the case for defence and is it a worthwhile investment? This question is addressed for two contrasting nations, namely, the UK and New Zealand. Economists have a set of standard analytical tools for addressing the question but they are difficult to operationalise. This paper provides policy‐relevant answers.
TL;DR: This article revisited the defence-growth nexus for the rivals of the Israeli-Arab conflict over the last four decades and found that there is no persistent adverse impact of military expenditures on economic growth.
Abstract: This paper revisits the defence–growth nexus for the rivals of the Israeli–Arab conflict over the last four decades. To this end, we utilize the Toda and Yamamoto (1995) causality test and the generalized variance decomposition. Contrary to the conventional wisdom and many earlier studies, we fail to detect any persistent adverse impact of military expenditures on economic growth. Our conclusions are kept intact even when we account for the possibility of endogenous structural breaks and during the post‐1979 peace treaty period. Our findings imply insignificant peace dividends once the conflict is resolved and the military spending is cut to internationally acceptable standards.
TL;DR: In this paper, the authors assess the impact of a positive defense spending shock on the growth rate of real GNP using a Factor Augmented Vector Autoregressive (FAVAR) model estimated with 116 variables spanning the quarterly period of 1976:01 to 2005:02.
Abstract: Empirical evidence on the effect of defense spending on US output is at best mixed. Against this backdrop, this paper assesses the impact of a positive defense spending shock on the growth rate of real GNP using a Factor Augmented Vector Autoregressive (FAVAR) model estimated with 116 variables spanning the quarterly period of 1976:01 to 2005:02. Overall, the results show that a positive shock to the growth rate of the real defense spending translates to a positive short‐run effect on the growth rate of real GNP lasting up to ten quarters, but the effect is significant only for two quarters. Beyond the tenth quarter, the effect becomes negative and shows signs of slow reversal at around the 17th quarter. Our results tend to indicate that the mixed empirical evidence, based on small‐scale Vector Autoregressive (VAR) and Vector Error Correction (VEC) models, could be a result of a small information set not capturing the true theoretical relationships between the two variables of interest.
TL;DR: This article measured wage differentials between Israeli Arab and Jewish workers between 1991 and 2003 using a panel of cross sections, and decomposed the wage gap into components corresponding to human capital, occupational segregation, selectivity, and a residual (unexplained gap).
Abstract: Using a panel of cross sections, this study measures wage differentials between Israeli‐Arab and Jewish workers between 1991 and 2003. The wage gap is then decomposed into components corresponding to human capital, occupational segregation, selectivity, and a residual (unexplained gap). The study shows large fluctuations in the wage gap, almost doubling in the last decade, reaching 75% in 1999. Because sudden changes in the underlying characteristics of the populations are not likely, a large part of the level and changes in the wage gap were captured by the residual – possibly one of the implications of the ongoing Israeli–Palestinian conflict.
TL;DR: In this paper, a structural vector autoregression model is used to assess the empirical effects of terrorism on output and prices in Israel, and long-run restrictions are used to interpret the effects in terms of aggregate demand and supply curves.
Abstract: This paper estimates a structural vector autoregression to assess the empirical effects of terrorism on output and prices in Israel. Long‐run restrictions are used to interpret the effects in terms of aggregate demand and supply curves. The responses indicate that the immediate effects of terrorism are similar to those associated with a negative demand shock. Such a leftward shift of the aggregate demand curve is consistent with the existence of adverse effects on most components of aggregate expenditure documented in previous empirical studies. The long‐term consequences of terrorism are similar to those related to a negative supply shock. Such a leftward shift of the long‐run aggregate supply curve agrees with adverse effects on the determinants of the potential output, such as contractions of physical capital highlighted in earlier work, as well as reductions of technological innovations and slowdowns of net immigrations, which have not been fully analyzed in the existing empirical literature.
TL;DR: This article examined whether economic growth increases international conflict using a global sample of states from 1875 to 1999 and found that economic growth, but not growth of military expenditures, raises the risk of violent interstate conflicts.
Abstract: Are states with growing economies more likely to become involved in violent interstate conflicts? This project examines whether economic growth increases international conflict using a global sample of states from 1875–1999. The theory argues that multi‐year economic growth increases the resolve of state leaders to reciprocate and escalate militarized interstate conflicts, thus increasing the occurrence of fatalities or war. The results show that economic growth, but not growth of military expenditures, raises the risk of violent interstate conflicts. The results do not support the proposition that economic slowdowns result in violent interstate conflicts.
TL;DR: The authors explored the effects of dyadic democracy on both the occurrence and level of militarized disputes, with an emphasis on longitudinal tendencies and degrees of violence, and found that experience with total war, namely, the First World War, induced democratic constraints on conflictual foreign policies via significant change in military manpower systems.
Abstract: This paper explores the effects of dyadic democracy on both the occurrence and level of militarized disputes, with an emphasis on longitudinal tendencies and degrees of violence. We argue that experience with total war, namely, the First World War, induced democratic constraints on conflictual foreign policies via significant change in military manpower systems. Experience with total war led democratic governments to recognize each other’s sensitivity to public concerns about the burdens imposed by conscription. Thus, democratic peace in the modern era can be traced to (1) total war experience for ‘old’ democracies; and (2) the level of violence in foreign policies exceeding a threshold that induces public concerns about the burden of conscription. Empirical testing based on the Militarized Interstate Disputes (MID) data set shows a significantly different effect for democratic dyads on the onset of militarized disputes before and after the First World War. Democratic dyads, however, do not reduce the lik...
TL;DR: In this paper, the authors employ a seemingly unrelated bivariate probit model to jointly estimate the factors that influence both further education and re-enlistment decisions, revealing that previous single equation models might be misspecified.
Abstract: Previous empirical studies examining the determinants of re‐enlistment probabilities have generally employed a univariate approach and have suggested that expected further education increases the likelihood of joining the army. However, the re‐enlistment and further education decisions can be interdependent. Accordingly, this study employs a seemingly unrelated bivariate probit model to jointly estimate the factors that influence both further education and re‐enlistment decisions. Empirical analysis indicates that there is a correlation between the re‐enlistment and further education decisions, revealing that previous single equation models might be misspecified. Moreover the geographical background, education level of the conscript, intention of further education and previous unemployment duration are influential in the re‐enlistment decision. Additionally, the further education decision appears to be determined by family and sibship characteristics, education level and age.
TL;DR: In 2004, stretched by wartime deployments, the US Army countered declining retention by increasing re-enlistment bonuses and implementing stop-loss to prevent soldiers from separating at the end of their enlistment as mentioned in this paper.
Abstract: In 2004, stretched by wartime deployments, the US Army countered declining retention by increasing re‐enlistment bonuses and implementing stop‐loss to prevent soldiers from separating at the end of their enlistment. We estimate the effects of bonuses, deployment, and stop‐loss on re‐enlistment between FY 2002 and 2006. We estimate that the baseline propensity to re‐enlist fell by 20%. However, we find that deployed soldiers are more likely to re‐enlist and that the estimated effects of re‐enlistment bonuses are similar to those estimated in peacetime. We evaluate the reasons for our findings, and calculate the cost effectiveness of re‐enlistment bonuses.
TL;DR: It is found that test scores, graduation rates, and enlistments are higher for students who participate early in high school and for those who persist in the program, and there are few effects for students participating in the last two years of high school.
Abstract: The Junior Reserve Officers’ Training Corps is a high school program that combines classroom teaching with extracurricular activities. The program is located primarily in inner city schools and serves at‐risk students. Its goals are multidimensional and include military preparation and improving academic achievement. Using High School and Beyond data we find that the program’s effects depend on the timing and intensity of involvement. Test scores, graduation rates, and enlistments are higher for students who participate early in high school and for those who persist in the program. Conversely, we find few effects for students participating in the last two years of high school.
TL;DR: In this paper, the authors investigated the labor market responses to conflict and labor market disruptions in the West Bank and Gaza Strip from 1987 to 1995 and found that disruptions later in the period are associated with increased reallocation between sectors and lower unemployment.
Abstract: This paper investigates the labor market responses to conflict and labor market disruptions in the West Bank and Gaza Strip. From 1987 to 1995 the West Bank and Gaza Strip witnessed an increase in instability as political conflict disrupted the economy. This paper finds that disruptions later in the period are associated with increased reallocation between sectors and lower unemployment, compared to equivalent shocks earlier in the period. Additionally, the effects of these shocks are primarily felt by younger workers. The findings are consistent with a decrease in human capital investment during this time, but several alternative explanations are also explored.
TL;DR: In this article, the authors explore whether there are latent common factors that impact on the military expenditures of 15 countries in the MENA region and whether these factors can be interpreted using principal component analysis.
Abstract: In this paper we explore the patterns of interactions between military expenditure shares in the MENA region over the period 1979–2007. We explore whether there are latent common factors that impact on the military expenditures of 15 countries in the MENA region and whether these factors can be interpreted. Unobserved common factors induce cross‐sectional dependence and may lead to traditional panel‐time series estimators being inconsistent. To identify these latent factors we apply principal component analysis. We evaluate the interpretation of the estimated factors using the multiple‐indicator multiple‐cause model. We find that there is a substantial evidence of cross‐sectional dependence in the MENA region, induced mainly by two unobserved factors, but these factors are difficult to interpret.
TL;DR: In this paper, the authors investigated whether the terrorist attacks of September 11, 2001, have had an ongoing or merely transitory effect on US trade in tourism and found strong evidence that, once other factors are held constant, real US exports and imports of tourism have both remained significantly below their pre-2001 level.
Abstract: Several studies have investigated whether the terrorist attacks of September 11, 2001, have had an ongoing or merely transitory effect on US trade in tourism. All conclude in favor of the latter. However, limitations in either the data and/or methodology employed by these studies give cause to query their findings. The present study avoids these limitations and finds strong evidence that, once other factors are held constant, real US exports and imports of tourism have both remained significantly below their pre‐2001 level.
TL;DR: A review and survey of the last decade of thematic coverage of the papers published in this journal can be found in this article, covering volumes 21-30 of the journal's last decade.
Abstract: Keeping with the established tradition in our journal, this paper reviews and surveys the last decade, that is volumes 21–30. It offers an overview of the thematic coverage of the papers published ...
TL;DR: In this paper, the authors examined the effect of military training on the earnings of young men in Sweden, based on the cohort of males born in 1973, who were conscripted to the Swedish Armed Forces.
Abstract: The purpose of our study was to examine the effect of military training on the earnings of young men in Sweden. The analysis is based on the cohort of males born in 1973. This cohort was conscripte ...
TL;DR: Analysis of ratings’ voluntary (quits) and involuntary (separation) exit patterns from the Royal Navy using an independent competing risks hazard regression analysis framework shows that both voluntary and involuntary exits are pro cyclical with respect to macroeconomic and labour market conditions for both male and female ratings.
Abstract: Manning difficulties and retention of skilled personnel is a timely issue in the British armed forces, and especially in the all‐volunteer Royal Navy. Allied with difficulties of matching personnel numbers and posts, significant skill mismatches can take a long time to eradicate, with obvious financial and operational penalties. In the light of these factors, a holistic understanding of the exit behaviour of naval personnel is vital for naval manpower planners. This paper analyses ratings’ voluntary (quits) and involuntary (separation) exit patterns from the Royal Navy using an independent competing risks hazard regression analysis framework. The results show that both voluntary and involuntary exits are pro cyclical with respect to macroeconomic and labour market conditions for both male and female ratings. Male ratings are more likely to quit or separate due to a lack of promotion to higher ranks as compared with females. Male ratings are also more likely to quit as a result of a hectic operational temp...