The investment/labor ratio in the Russian armed forces: Lessons from the us?

The main goal of this paper is to evaluate recent trends in Russian military reorganization. In this effort, we enlist the experience of the US military's transition from conscription to an all-volunteer force (AVF). We show how the US 1970s transition to market-based acquisition of labor contributed to a rising military investment-to-labor (?K/L) ratio. In Russia since the start of market reforms, this ratio has been falling. We explain this divergence by noting the increase in the relative price of Russian military capital resulting from the switch to “quasi-market” acquisition of capital while a draft remains in use for obtaining labor. Russia's transition to an AVF and the latest efforts to “recapitalize” its military are analyzed and evaluated.