The Effect of State Firearm Laws on Firearm Manufacturing Location

J Brauer | © Stone Garden Economics
[with Daniel Montolio, and Elisa Trujillo]

Exceptions notwithstanding, the most prominent weapon used in intrastate conflict today is the handheld firearm, such as various types of pistols and rifles. True, in Rwanda, in 1994, agricultural implement—machetes—were an important instrument of violence, and in Libya and Syria today major conventional weapon systems are used. In Nigeria, the Boko Haram group creates news headlines with its frequent use of city and market bombings and, elsewhere, suicide bombings and public beheadings are in vogue. In none of these violent conflicts, however, is the firearm absent. In fact, virtually every major conflict is underpinned by the use of the gun.

Since the year 2000 or so, and in large part due to the commendable efforts of the Small Arms Survey in Geneva, we have learned much about small arms, including handheld firearms. We know much more than we used to about firearm users, firearm misuse, about the consequences of firearm misuse, about complementary products such as ammunition, and about legal and illicit firearm supply routes and networks. Nonetheless, relatively little is known about the firearm industry itself, i.e., its manufacturers. We do have some counts of the number of manufacturers, we do have some names of companies and some location information but in regard to the internal workings of the industry we do not know much, for example, about innovation, cost, revenue, profitability, ownership, and labor force, nor much about the incentive structure within the industry across different countries.

Data are the foundation of evidence-based analysis and policy debate. To help make progress in regard to firearm-related data, in May 2014, the Small Arms Data Observatory (SADO) was established. It is a global research consortium initially consisting of researchers living in Brazil, Norway, Spain, Thailand, and the United States. For now focusing only on the Americas, SADO’s objectives are to host, widely disseminate, and analyze data sets related to small arms manufacture, trade, (mis)use, and effects. Researchers worldwide are welcome to join the consortium by submitting data sets and/or working papers.

SADO’s first working paper examines, for the years 1986 to 2010, the relation between variations in U.S. state firearm laws and the number of manufacturing premises per state. From three different sources, we coded state firearm laws into a variety of rubrics, such as laws related to the intent to impede illicit trade, to impose state licensing requirements, or to limit sales of certain types of firearms. For the same years, we also hand-coded data from the Bureau of Alcohol, Tobacco, Firearms, and Explosive (ATF) on the street-level location of over 2,700 federally licensed firearm manufacturers. (The data sets will be made public shortly.) In our statistical models, we also introduced variables related to private and public sector activity per state as well as for crime against persons or property.

As might be expected—but no seems to have statistically tested this before—U.S. states with laws that might be interpreted as “lax” host more firearm manufacturing premises than states with more “strict” firearm laws. Law matters. This is exactly what the industry itself claims: “Strong-law” states push manufacturers across state boundaries to “weak-law” states, generally out of the Northeast of the country (e.g., Connecticut, New York) to the Southeast (e.g., the Carolinas) and the Southwest (e.g., Arizona, Texas). Between 2013 and mid-2014, for example, prominent firearm makers such as Beretta, Kahr Arms, Remington, and Ruger all announced partial movement of their operations to (or expansions in) “weak-law” states. The industry then ties such actions to political and media campaigns in order to lobby “strong-law” state legislators to moderate the laws, in part, supposedly, to “save” home-state jobs and to mollify firearm-owning voters.

However, our statistical analysis also finds that in addition to law, the private and public sector economic variables matter as well, such as the degree of unionization (a proxy for labor cost) and state tax revenues (a proxy for public sector monetary demands made on the private sector). And indeed, when reading the local, “weak-law” state press, invariably it is not “weak law” alone but the degree of state relocation incentives offered that influence firearm manufacturers’ decisions of whether or not it is economically worthwhile to relocate from one state to another. Incentives matter, and law is but one of them. In this regard at least firearm makers are “just like any other industry.”

To establish as a statistical fact that firearm makers are “just like any other industry” is important because it may then permit researchers and policymakers to properly consider incentive-based and evidence-based policies in regard to the manufacture, trade, and (mis)use of firearms, in the United States or elsewhere. While we are a long way from limiting or preventing firearm-based intrastate violent conflict, whether in Colombia or Iraq or Ukraine, a better understanding of the evidence pertaining to and the incentives governing the firearm industry itself will be an important element in thinking about to how make the world a somewhat safer, better place to live.

J Brauer is Professor of Economics, James M. Hull College of Business, Georgia Regents University, Augusta, Georgia, USA. He is also a Visiting Professor of Economics at the EBA Program, Department of Economics, Chulalongkorn University, Bangkok, Thailand. Daniel Montolio and Elisa Trujillo are with the Faculty of Economics and Business and the Barcelona Institute of Economics (IEB), University of Barcelona, Barcelona, Spain.

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