The impact of the current defense build-down
For the third time since the end of World War II, the United States is engaged in a long-term defense build-down. This article provides a broad macroeconomic overview of the current build-down relative to the build-downs following the Korean War and the Vietnam War. In addition, the authors examine regional and industrial impacts of cuts in defense spending.
The interplay between preemptive and defensive counterterrorism measures: a two-stage game
A two-stage game depiction of counterterrorism is presented, where the emphasis is on the interaction between the preemptive and defensive measures taken by two targeted countries facing a common threat. The preemptor is likely to be the high-cost defender with the greater foreign interests. A prime-target country may also assume the preemptor role. The analysis identifies key factors - cost comparisons, foreign interests, and targeting risks - that determine counterterrorism allocations. The study shows that the market failures associated with preemptive and defensive countermeasures may be ...
Government policy response to war-expenditure shocks
A theory of government policy determination, based on intertemporal distortion-smoothing and limited commitment, matches the set of stylized facts of U.S. wartime policy.
Security (not guns) and butter
A primer on the arms trade
Among the many consequences of the recent Persian Gulf War was a heightened interest in the international trade in armaments, with some analysts forecasting a substantial increase. This article surveys the arms trade, focusing chiefly on the economic features. The survey finds that national prosperity is not connected to a high ratio of arms exports to total output. Nor does poverty stop a nation from spending a relatively large share of its total income on arms from abroad. ; In recent years two-thirds of all arms exports have come from the United States and the Soviet Union. However, the ...
The effects of war risk on U.S. financial markets
This paper measures the effects of the risks associated with the war in Iraq on various U.S. financial variables using a heteroskedasticity-based estimation technique. The results indicate that increases in what we call the "war risk" factor caused declines in Treasury yields and equity prices, a widening of lower-grade corporate spreads, a fall in the dollar, and a rise in oil prices. This factor accounted for a considerable portion of the variances of these financial variables over the three months leading up to the arrival of coalition forces in central Baghdad.
Collateral damage: trade disruption and the economic impact of war
Conventional wisdom in economic history suggests that conflict between countries can be enormously disruptive of economic activity, especially international trade. Yet nothing is known empirically about these effects in large samples. We study the effects of war on bilateral trade for almost all countries with available data extending back to 1870. Using the gravity model, we estimate the contemporaneous and lagged effects of wars on the trade of belligerent nations and neutrals, controlling for other determinants of trade. We find large and persistent impacts of wars on trade, and hence on ...
The comparative growth performance of the U.S. economy in the postwar period
Productivity growth is the single most important determinant of improvements in a country's living standards over time. Accordingly, the U.S. productivity slowdown of the past two decades has caused great concern and sparked much debate. ; In this article, Mark A. Wynne argues that the problems associated with the U.S. slowdown may be overstated. Wynne shows that the rates of productivity growth experienced in the immediate postwar period were extraordinary in comparison with historical standards. Thus, some slowdown was probably unavoidable. U.S. productivity performance in comparison with ...
An investigation into the magnitude of foreign conflicts
Political economy of state homeland security grants