| Domestic production of arms has increasingly not only become a major route by which Less Developed Countries (LDCs) arm themselves and others (via exports), but also a means through which economic development is sought, in terms of promoting industrialization. Decisions to produce arms locally should influence the industrial structure more directly than decisions to import them. Yet, this phenomenon and its implications for socioeconomic development in the LDCs have received little or no empirical attention.; The present study fills some of the void. It examines the direct and indirect effects of domestic manufacture of weapons, sometimes referred to as military-led industrialization, on industrial development. A fully specified model of multivariate regression (recursive as well as simultaneous equations systems) and path analyses, solved by the robust Three Stage Least Squares (3SLS) procedure are employed to examine these direct and indirect effects in terms of (a) the contribution of arms production in developing technical and scientific knowledge and (b) the contribution of arms production in developing technology. Thus, the model allows for: (1) A Technical Skills equation for the indirect effect via human capital. (2) A civilian Capital Formation equation for the indirect effect via physical capital. (3) An overall civilian Industrial Development equation for the direct effects. (4) An Arms Production equation reflecting the endogeneity of arms production in the system.; Furthermore, case studies on Brazil, as a major producer of arms, and Nigeria, as a minor producer, are conducted to complement the general analysis and thus, provide richer detail about the investigated relationship. Throughout the study, other related and important issues, in addition to the stated principal objective, were also dealt with. These include questions about the political and economic motives for arms production, the factors influencing the behavior of the suppliers of military technology, the level of arms exports, and the structure of the arms industries as well as the scope of weapons produced.; Overall, the study shows that arms production may stimulate industrial development in the LDCs. The empirical results show that there is a strong positive indirect relationship between arms production and industrial development, via the technical knowledge route. This is consistent with the idea of a "spin-off" or linkage effect, in the sense that arms production may generate and upgrade technical skills necessary for industrial development. The results of the case studies, especially with respect to Brazil, were generally in line with the empirical finding. |
