Do military exports stimulate civil exports?
Recent research suggests that the economic benefits to the UK economy from arms exports might not be that great. Surveys suggest that almost two-thirds of those that lose their job in the defence industry either retire or find new work within one year and arms exports are heavily subsidized by the UK government. Thus any cut in such exports would reduce the annual subsidy payable by the British taxpayer. However, in addition to the direct economic benefits from defence exports there might be indirect effects. Hartley and Hooper (Does trade follow the flag? A study of the UK trade and security policy, Centre for Defence Economics, University of York, 1998) considered whether UK arms exports might lead to higher civil exports. This paper examines this hypothesis. It estimates import demand functions for three countries (Indonesia, Saudi Arabia and South Korea) and for the world as a whole over the period 1970-1997. The results suggest that UK arms exports do not stimulate UK civil exports.