Input demands and elasticities in U.K. defence industries

It is often claimed that U.K. arms industries are inefficient. This paper considers the input demand behaviour of defence industries. Two hypotheses are formulated relating to input inelasticity and the resource effects of cuts in military spending. First, it is predicted that the demand elasticities of inputs in defence industries will be lower than those in similar civilian sectors. Second, defence reviews are expected to have a ‘shock effect’ resulting in a ‘shake-out’ of resources from weapons producers. The evidence suggests that the U.K.'s defence industries do not respond to price changes nor to defence reviews.