Accession Number : ADA019190

Title :   Capital/Labor Substitution and Factor Price Ratios in a Military Service: A Study of Defense Resource Allocation.

Descriptive Note : Doctoral thesis,

Corporate Author : MASSACHUSETTS UNIV AMHERST GRADUATE SCHOOL

Personal Author(s) : Clark,Rolf H.

Report Date : AUG 1975

Pagination or Media Count : 183

Abstract : While some analysts claim U.S. Defense systems should become more capital intensive to offset rising labor costs, other feel they are already too sophisticated for the Defense labor force. The research has three goals, which help clarify this division. First, capital/labor ratios as indicators of Defense efficiency are oriented within existing capital accumulation theory. Second, models are developed which are consistent with this theory. Third, the parameters of these models are estimated using U.S. Navy budget and asset data. An attempt is then made at synthesizing the two divergent viewpoints in light of the research models and findings. The findings include the following: (1) both Defense capital and manpower costs are underestimated by approximately 30%, thus cost bias may be insignificant. The implications of upsetting this balance through new policies such as a salary pay system are discussed. (2) Shifts toward higher capital intensity are evident in new systems, but because of the low and decreasing ratio of new to total defense hardware, changes in overall capital labor ratios have reacted slowly. Finding (2) is presented by comparing substitution elasticity for new versus total systems, and forms the basis for synthesizing the two views on proper capital accumulation.

Descriptors :   *Military budgets, *Cost estimates, *Economic analysis, Military procurement, Manpower, Confidence level, Confidence limits, Policies, Trade off analyses, Mathematical models, Salaries, Labor, Cost analysis, Weapon systems, Naval planning, Theses

Subject Categories : Administration and Management
      Economics and Cost Analysis

Distribution Statement : APPROVED FOR PUBLIC RELEASE