Defense promotion and industrial development

Nathan Lane

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: Major economies are rearming, and rearmament is itself industrial policy. I ask whether defense promotion—especially innovation policy—can drive industrial development beyond the defense sector. I synthesize evidence on supply-side instruments (including R&D tax credits and grants) and demand-side procurement, tracing each from its effects on firms' own R&D investment through innovation and productivity outcomes to spillovers beyond the recipient firm. The evidence is conditionally positive: public support more often crowds private effort in than out, but returns concentrate among particular firms, technologies, and designs, and weaken as one moves from investment to outputs and from civilian to defense settings. Defense spillovers, in particular, cannot be assumed. I draw five lessons for designing defense industrial policy that delivers broader economic returns, with the greatest weight on Europe's rearmament. The developmental promise of defense promotion is real but conditional: whether rearmament also strengthens the wider industrial economy turns on how it is designed.

Keywords: defense economics; industrial policy; innovation policy; R&D; procurement; EU; defence (search for similar items in EconPapers)
Date: 2026-08-12
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cep.lse.ac.uk/pubs/download/dp2208.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cep:cepdps:dp2208

Access Statistics for this paper

More papers in CEP Discussion Papers from Centre for Economic Performance, LSE
Bibliographic data for series maintained by ().