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Capital-Labour Substitution In Uk Armed Forces

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  • Peter Macdonald

Abstract

This paper estimates the elasticity of substitution (σ) between military personnel and other military inputs, building on a study by Ridge and Smith published in 1991. The major difference is that this paper uses data on the average military wage, which Ridge and Smith did not, allowing a much more flexible specification of both the demand and supply equations. Accounting for a structural break at the end of the Cold War, it finds σ likely to be some small positive number, much lower than previous estimates suggest.

Suggested Citation

  • Peter Macdonald, 2006. "Capital-Labour Substitution In Uk Armed Forces," Defence and Peace Economics, Taylor & Francis Journals, vol. 17(2), pages 141-153.
    • Handle: RePEc:taf:defpea:v:17:y:2006:i:2:p:141-153
    DOI: 10.1080/10242690500512236
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    References listed on IDEAS

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    1. Warner, John T., 1995. "The economics of military manpower," Handbook of Defense Economics, in: Keith Hartley & Todd Sandler (ed.), Handbook of Defense Economics, edition 1, volume 1, chapter 13, pages 347-398, Elsevier.
    2. Ron Smith & Anthony Humm & Jacques Fontanel, 1987. "Capital-labour substitution in defence provision," Post-Print hal-03205374, HAL.
    3. Phillips, P.C.B., 1983. "Exact small sample theory in the simultaneous equations model," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 1, chapter 8, pages 449-516, Elsevier.
    4. Peter Kennedy, 2003. "A Guide to Econometrics, 5th Edition," MIT Press Books, The MIT Press, edition 5, volume 1, number 026261183x, April.
    5. Wooldridge, Jeffrey M., 1990. "A note on the Lagrange multiplier and F-statistics for two stage least squares regressions," Economics Letters, Elsevier, vol. 34(2), pages 151-155, October.
    6. Ash, J Colin K & Udis, Bernard & McNown, Robert F, 1983. "Enlistments in the All-Volunteer Force: A Military Personnel Supply Model and Its Forecasts," American Economic Review, American Economic Association, vol. 73(1), pages 145-155, March.
    7. James Hosek & Mark Totten, 2004. "The effect of deployment on first- and second-term re-enlistment in the US active duty force," Defence and Peace Economics, Taylor & Francis Journals, vol. 15(5), pages 433-451.
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    Cited by:

    1. MacDonald, Peter, 2013. "Labour substitution and the scope for military outsourcing," MPRA Paper 46688, University Library of Munich, Germany.

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