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The end of the Cold War brought about fundamental changes for the U.S. defense industry. Faced with reduced military spending, the industry has relied on rapid consolidation and government assistance in the form of subsidies, tax breaks, and the opening of foreign markets that were traditionally off-limits to grow and prosper in the post-Cold War world. The U.S. has since become the largest supplier of weapons to the developing world. Given this strategy of targeting foreign markets, it is increasingly important to examine the possible consequences - both in terms of U.S. national security and the socioeconomic conditions within’ the importing state. This study uses cross-sectional time-series data to analyze the relationship between U.S. arms transfers and stability in the developing world. A nonrecursive multiple-equation model is constructed composed of three endogenous variables to define political and social stability. U.S. arms transfers along with fourteen control variables are used to explain variation in the endogenous variables. ..PAT.-Unpublished Manuscript [ABSTRACT FROM AUTHOR]