Estimating the Impact of the Soviet Union's Threat on the United States-- Japan Alliance: A Demand System Approach

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Abstract
An empirical model of the United States-Japan alliance is presented by employing the linear logarithmic expenditure system. To analyze and test the impact of the Soviet Union's threat on both allies, external threats are incorporated into the demand system. The empirical results obtained: the military buildup by the Soviet Union affects the preferences of both Japan and the United States toward military over civilian goods; Japan is more sensitive to the Soviet Union's threat than the United States; and the external threat is a more significant factor in affecting the military expenditures of each ally than a change in prices.

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