The arms trade

The arms trade is highly controversial and raises difficult policy issues. The controversies tend to concentrate on the moral, military and political dimensions of arms exports decisions. Quite a lot of light can be shed on this murky market by asking basic economic questions and using standard economic models. We begin with a structured economic description of the evolution of the international arms market in terms of the factors that influence demand and supply and thus prices and quantities. Then we review the policy issues faced by EU members: in particular, whether a common control regime is needed to harmonize their regulation of arms exports. To address these policy issues, we present some models of the market that we have developed and examine their implications for the interesting interactions that characterize the trade. Copyright Centre for Economic Policy Research, Centre for Economic Studies, Maison des Sciences de l'Homme 1997.