Defending election victory by attacking company revenues: The impact of elections on the international defense industry

Jeroen Klomp

European Journal of Political Economy, 2023, vol. 79, issue C

Abstract: This study examines the influence of upcoming general elections on the sales revenues of major defense companies. Based on the empirical findings, several broad conclusions can be drawn. First, as a result of election-induced procurement decisions, the total revenues of defense companies in major arms-producing countries increase when domestic elections are approaching to boost the performance of the economy. Second, elections in democratic foreign countries cause a fall in the revenues received by domestic defense firms as foreign governments are likely to shift their public expenditures away from defense imports and towards domestic contractors or to other public spending categories. In contrast, elections in autocratic foreign countries slightly improve the defense sales of arms producers as authoritarian rulers try to deter any political actions of challengers by signalling their military capabilities. Finally, governments of countries that are subject to serious security risks are more likely to increase their purchase of military-strategic items abroad when elections are upcoming for protection purposes.

Keywords: Elections; Political budget cycles; Contracting cycles; Defense companies (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:poleco:v:79:y:2023:i:c:s0176268023000757

DOI: 10.1016/j.ejpoleco.2023.102431

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