The effects of the world defense industry and US military aid to Israel on the Israeli defense industry: A differentiated products model

Yoad Shefi, Asher Tishler

Research output: Contribution to journalArticlepeer-review

Abstract

This paper models the interactions between the defense industry market structure and the defense needs of Israel, the USA and Western Europe, which produce several heterogeneous defense goods. The model specifies that the defense industries of the US and Europe are 'large while that of Israel is 'small. The US military aid to Israel is also an integral part of the model. The results show that net defense costs of Israel are minimal when the number of its defense firms is one. The model predicts that an increase in US military aid reduces Israels government expenditure, its defense industrys profits and its net defense costs.

Original languageEnglish
Pages (from-to)427-448
Number of pages22
JournalDefence and Peace Economics
Volume16
Issue number6
DOIs
StatePublished - Dec 2005

Keywords

  • Defense industry
  • Industry profits
  • Net defense cost
  • Security levels
  • US military aid

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