Why civil-military integration can enrich a country and strengthen its armed forces? Civil-military integration, evolution of division of labor, and increasing returns

HUANG Chaofeng1 JU Xiaosheng1 JI Jianqiang1 MENG Binbin1

(1.School of Arts and Sciences, National University of Defense Technology 410073)

【Abstract】As a national development strategy, civil-military integration (CMI) policy has been vigorously and unprecedentedly implemented in China to coordinate the development of military and civilian sectors, thus enriching the country and strengthening its armed forces. However, many important theoretical issues have not yet been interpreted, such as why and how CMI can synchronize both economy and defense development, what the suitable social and economic conditions are for CMI policy implementation, and what the limitations are for the further development of CMI policy. The most literature emphasizes the significance of CMI policy or descriptively discusses the experience of CMI. Much less literature provides serious empirical analysis. Furthermore, the most analyses, based on the theory of neoclassical economics, have focused on resource allocation, put particular stress on breaking down the barriers that separate defense industries from civilian economic and research systems, and enhanced the flow of economic factors. One latent problem is that such analyses neglected the role of industrial structure and organization in reducing the relative scarcity of resources. In this paper, we built a model based on the theory of division of labor to study the CMI performance of industrial organizations, especially the condition for CMI policy to raise the probability of increasing returns. We made several findings. First, the process of CMI is the same as that of deepening the division of labor between civil and defense sectors, which can enhance the mass social production and exchange network and ultimately promote economic development and defense construction. Thus, we provided a theoretical foundation for the significance of CMI as a national strategy. Second, we explored the specific mechanism of CMI function. The economic and defense performance of CMI is derived from the increasing returns to specialized economies, diversified economies, and roundabout production. Under different division of labor modes, the economic sources of increasing returns are different. Third, given other technical parameters, such as the elasticity of intermediate goods and the defense expenditure ratio, the evolution of CMI, subject to transaction efficiency, depends on the tradeoff between returns on the division of labor and coordination costs. The tangible hand of the government and the market should join together to enhance trade efficiency and promote CMI. Compared with the most relevant literature, we used neoclassic economics of division of labor theory to study the potential effects of CMI on economic organization and economic performance. Our model can not only interpret the potential sources of increasing CMI returns and give the related conditions and limitations but explain why the boundary between the defense and civil sectors tends to disappear with growing CMI. As an important implication for CMI, we should focus on not only resource allocation but organization model and the level of division of labor as the latter also has positive impacts on reducing the relative scarcity of resources despite being neglected in the literature. Our study has several important policy implications. As trade efficiency is an important factor in the level of CMI division, policymakers should follow market principles and strengthen top-level coordination to promote standardization and thus increase trade efficiency. Furthermore, the market system should be cultivated and improved, and the role of market mechanism in the individuals’ free choice of specialization model and the guidance of the social division of labor should be given full attention. Policymakers should remain committed to consolidating and increasing the unity between the government and armed forces to eliminate barriers in market access, protect property rights, and guarantee fair and open markets working at a low cost.

【Keywords】 civil-military integration; enriching country and strengthening armed forces; division of labor economy; increasing returns; trade efficiency;

【Funds】 National Natural Science Foundation of China (71503259) The National Social Science Fund of China (11CGL115) Hunan Provincial Social Science Foundation (16ZWC20 and 16ZWC49) Pre-research Project of National University of Defense Technology (JZ16-02-03 and JC15-08-03)

Download this article


    [1]. ① This paper covers two kinds of final products, four kinds of intermediate products, and 18 decision variables. Decision variables have 218 modes of zero-positive value combination. According to the Bohr–van Leeuwen theorem plus budget constraint, positive utility constraint, and CMI technology transfer constraint, we obtain seven feasible partial division of labor structures. Due to space limitations, they are not all listed but available on request. This paper, under the given technological parameters, calculates the per capita utility where each mode, including self-sufficiency, partial work, and complete division of labor, changes from 0 to 1 with trade efficiency and determines optimal division of labor mode under each trade efficiency level by comparing per capita utilities.

    [2]. ② Configuration represents a consumer-producer production and consumption plan.


    Allyn Abbott Young. Comparative Economic & Social System (经济社会体制比较), Jia, G. (trans.), (2) (1996).

    Chen, J. & Yuan, S. Global Positioning System (全球定位系统), (1) (2005).

    Jacques S. Gansler. Democracy’s Arsenal Creating A Twenty-first-century Defense Industry (21世纪的国防工业) Huang, C. & Zhang, Y. (trans.) Beijing: National Defense Industry Press, (2013).

    He, L. Computer and Network (通信技术与发展), (2) (1997).

    Jia, G. Nankai Economic Studies (南开经济研究), (6) (1998).

    Jia, G. Nankai Economic Studies (南开经济研究), (1) (1999).

    Jiang, L. Defence Industry Conversion in China (中国军转民), (11) (2012).

    Lu, Z., Yu, L. & Jiang, L. Military Economic Research (军事经济研究), (2) (2011).

    Sun, G. The Division of Labor in Economics: A History (劳动分工经济学说史) Li, J. (trans.) Beijing: Truth & Wisdom Press, (2015).

    Tao, Z. Avionics Technology (航空电子技术), (3) (1990).

    Xu, X. Aerospace China (世界导弹与航天), (6) (1991).

    Yang, X. Economics: New Classical Versus Neoclassical Framework (经济学: 新兴古典与新古典框架). Beijing: Social Sciences Academic Press, (2003).

    Zeng, L., Huang, C., Ji, J. et al. Science & Technology Progress and Policy (科技进步与对策), (23) (2011).

    Zhou, J. The Peaceful Development of Resources of National Defense: A Study of the Conversion of Military Resources to Civilian Fields in China (国防资源逆向开发: 中国军转民问题研究). Beijing: Hunan Publishing House, (1992).

    Benoit, E., 1978, “Growth and Defense in Developing Countries”, Economic Development and Cultural Change, 26, 271–280.

    Blom, M., Castellacci, F., and Fevolden, A. M., 2013, “The Trade-off between Innovation and Defense Industrial Policy: A Simulation Model Analysis of the Norwegian Defense Industry”, Technological Forecasting and Social Change, 80 (8), 1579–1592.

    Chiang, J. T., 1999, “Defense Conversion and Systems Architecture: Challenges to Taiwan’s Aircraft Industry”, Technology in Society, 21 (3), 263–274.

    Gansler, Jacques S., 1989, Affording Defense, MIT Press.

    Jordi, M., 1997, “Which Way to Go? Defense Technology and the Diversity of ‘dual-use’ Technology Transfer”, Research Policy, Vol. 33 (2), 367–385.

    Jordi, M., 1997, “Which Way to Go? Defense Technology and the Diversity of ‘dual-use’ Technology Transfer”, Research Policy, Vol. 33 (2), 367–385.

    Kulve, H. T., and Smit, W. A., 2003, “Civilian-military Co-operation Strategies in Developing New Technologies”, Research Policy, 32 (6), 955–970.

    Lu, W.M., Qian, L. K., Nourani, M., Huang, F. W., and Lev, B., 2016, “Evaluating the Efficiency of Dual-use Technology Development Programs from the R&D and Socio-economic Perspectives”, Omega, 62, 82–92.

    Lu, W.M., Qian, L. K., Nourani, M., Huang, F. W., and Lev, B., 2016, “Evaluating the Efficiency of Dual-use Technology Development Programs from the R&D and Socio-economic Perspectives”, Omega, 62, 82–92.

    OTA, US Congress Office of Technology Assessment, 1994, “Assessing the Potential for Civil-military Integration: Technologies, Processes and Practices”, OTA-ISS-611. US Government Printing Office.

    Stowsky, J., 2004, “Secrets to Shield or Share? New Dilemmas for Military R&D Policy in the Digital Age”, Research Policy, 33 (2), 257–269.

    Sun, G., Yang, X., and Yao, S., 2004, “General Equilibrium in Large Economies with Endogenous Structure of the Division of Labor”, Journal of Economic Behavior and Organization, 55 (2). 237–256.

    Vekstein, Daniel, 1999, “Defense Conversion, Technology Policy and R&D Networks in the Innovation System of Israel”, Technovation, Vol. 19 (2), 615–629.

This Article


CN: 11-1081/F

Vol 52, No. 08, Pages 187-201

August 2017


Article Outline


  • 1 Introduction
  • 2 Literature review
  • 3 Evolution of division of labor and CMI
  • 4 Division of labor evolution model of CMI
  • 5 Numerical simulation
  • 6 Case analysis: CMI evolution of GPS satellite navigation industry
  • 7 Conclusions and policy suggestions
  • Footnote