Estimates of Unit Cost Reductions of the F-16 Fighter as a Result of U.S. Arms Export Production

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Estimates of Unit Cost Reductions of the F-16 Fighter as a Result of U.S. Arms Export Production

Journal of Cost Analysis and Parametrics

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Arms exports have increasingly become an attractive option for reducing escalating unit costs of new weapon systems to the United States Department of Defense. However, while there is no lack of conjecture, there is little data that show weapon system costs to the United States actually decrease when the same weapon is sold to a foreign buyer. The authors use the sale of the F-16 multi-role fighter aircraft to foreign nations as a case study to quantify the financial gains realized through learning and economies of scale attributed to export production. Using a rate-adjustment cost improvement analysis, the authors case study shows the unit costs the United States Department of Defense would have incurred without the concurrent export production of F-16s. Estimates suggest that the production savings resulting from export production were in excess of the research, development, test, and evaluation costs of the F-16 for the period 1975 to 1991. The potential benefits associated with keeping the F-16 production line warm through export production and the limits of applying the findings to other weapon systems are discussed.


Captain Andrew A. Yeung, is a budget analyst in the Programs & Resources Department within Headquarters, United States Marine Corps in Washington, D.C. He received his B.A. degree from the University of Michigan, Ann Arbor and a M.B.A. degree from the Naval Postgraduate School in 2010. His research interests focus on statistical modeling of international arms transfers.

Keenan D. Yoho, is an Assistant Professor at the Naval Postgraduate School. Keenan’s research focuses on the analysis of alternatives under conditions of uncertainty and resource scarcity. Recent areas of interest have been on special operations, supply chain management, operations and logistics, humanitarian assistance and disaster response, and strategies to increase American military effectiveness over the next century.

Jeremy Arkes, (PhD, Economics, University of Wisconsin) is an Associate Professor of Economics at the Naval Postgraduate School. He previously worked as an Economist at the Center for Naval Analyses and at RAND Corporation. Dr. Arkes’ military research focuses on military recruiting, retention, attrition, as well as on how deployments to Iraq and Afghanistan have affected the mental health of military personnel. In addition, he has conducted research of sports issues (such as the hot hand in basketball and the rushing vs. passing issue in football) and on how the strength of the economy affects various youth behaviors (such as substance use and weight problems).