ABSTRACT
The offer of an offset package as part of a weapons procurement deal is intended primarily as a marketing tool, not as a means of encouraging development. But whatever the motive for offering such a package, it is important to ask what effects, positive and negative, intended or unintended, the offsets are likely to have on the process of economic development in the procuring nation. Keeping in mind the important distinction between economic growth and economic development, we begin by considering the economic impacts of military spending (and military production) on the latter. The analysis then turns to the political economy of offsets in general, and their impact on development in particular. The likely impact on development of indirect offsets is compared to that of direct offsets. Finally, in light of the preceding analysis, we consider how the availability and design of offsets should be taken into account in the process of military procurement, from the point of view of achieving economic development goals.
