Defense Spending and the Trade Performance of U.S. Industries

by Loren Yager, C. Richard Neu

Download

Download eBook for Free

FormatFile SizeNotes
PDF file 5.4 MB

Use Adobe Acrobat Reader version 7.0 or higher for the best experience.

Purchase

Purchase Print Copy

 FormatList Price Price
Add to Cart Paperback139 pages $30.00 $24.00 20% Web Discount

Abstract

U.S. defense spending increased sharply during the early 1980s, especially in the defense budget categories of procurement and research, development, testing, and evaluation. Purchases from these categories are concentrated in a small number of high-technology industries. During this same period, the U.S. surplus in high-technology trade declined sharply. This report examines the effect of increases in defense spending to determine whether they contributed to the poor trade performance of high-technology industries. The authors develop trade performance measures to highlight the performance of sectors that are exposed to different degrees of competition for scarce inputs. Industries with good trade performance include plastic and rubber medical supplies, optical instruments, and missiles and space vehicles. Those with the poorest trade performance include iron and steel products and also service industry machines, yachts, and fabricated structural metal products. The findings suggest that, to the extent that increases in defense spending led to a higher budget deficit, they may have contributed to poor trade performance in the form of a higher overall trade deficit by increasing the value of the dollar. But the authors find no evidence that increased defense spending was particularly damaging to the trade performance of high-technology industries.

This report is part of the RAND Corporation report series. The report was a product of the RAND Corporation from 1948 to 1993 that represented the principal publication documenting and transmitting RAND's major research findings and final research.

Permission is given to duplicate this electronic document for personal use only, as long as it is unaltered and complete. Copies may not be duplicated for commercial purposes. Unauthorized posting of RAND PDFs to a non-RAND Web site is prohibited. RAND PDFs are protected under copyright law. For information on reprint and linking permissions, please visit the RAND Permissions page.

The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.