The Economics of European Defense Industrial Policy

Abstract

The policy comprises a Single Market for defense equipment and a European defense industrial base. A brief history of the policy is presented. The 2016 European Defence Action Plan (EDAP) is designed to address the lack of interoperability, technology gaps and insufficient scale economies. The stylised facts of European defense spending and arms firms are outlined. The economics of arms collaboration is reviewed and assessed. Alternative models of arms collaboration are evaluated. Rising unit costs and Brexit are future challenges for the policy.