The Political Economy of Aerospace Industries

The Political Economy of Aerospace Industries

A Key Driver of Growth and International Competitiveness?

Keith Hartley

The Political Economy of Aerospace Industries will appeal to undergraduate and graduate students in industrial and defence economics, public choice and policy courses. It will also be of interest to researchers, policy-makers and those involved in the industry in various different capacities.

Chapter 9: A public choice analysis

Keith Hartley

Subjects: economics and finance, industrial economics, political economy, public choice theory, politics and public policy, political economy, public choice


Economists are often attracted by their competitive market model which is based on large numbers of buyers and sellers. Aerospace markets depart from this competitive model. The military sector is dominated by governments as a major or the only buyer and by a monopoly or oligopoly suppliers, usually with entry restrictions with firms producing differentiated products and markets often in disequilibrium. Observers of the aerospace industry see evidence of its dependence on government and the presence of a military–industrial complex with large firms forming powerful producer groups. Such groups will lobby governments for defence contracts, for national markets which are protected from foreign competition and for contracts which provide a guaranteed income and favourable profit rates. Producer groups will also lobby government for state-funding for civil aircraft and engine programmes. The result is aerospace industries operating in political markets which are more appropriately analysed using public choice analysis. Government decisions are likely to be the result of actions by various agents and interest groups in the political market, each acting in their own self-interest and seeking to influence policy in their favour. This chapter outlines the possible role of these agents and interest groups in formulating policy towards the aerospace industry. Does public choice analysis provide a framework for analysing the military–aerospace industrial complex?

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