The impact of military burden on long-run growth and welfare

This paper presents an endogenous growth model to examine how a government's resource allocation between the defense and non-defense sectors will govern both economic growth and social welfare. We demonstrate that there exists an optimal defense expenditure share that maximizes the economic gro...

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Bibliographic Details
Published in:Journal of development economics 2002-08, Vol.68 (2), p.443-454
Main Authors: Shieh, Jhy-yuan, Lai, Ching-chong, Chang, Wen-ya
Format: Article
Language:English
Subjects:
Defense
Defense spending
Development economics
Development studies
Economic growth
Endogenous growth
Growth models
Military expenditure
Military spending
Public expenditure
Resource allocation
Social conditions & trends
Social welfare
Studies
Welfare
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Summary:This paper presents an endogenous growth model to examine how a government's resource allocation between the defense and non-defense sectors will govern both economic growth and social welfare. We demonstrate that there exists an optimal defense expenditure share that maximizes the economic growth rate, but this rate is smaller than the welfare-maximizing share. This result can be viewed as a possible vehicle to explain why in many developing countries arms limitation and disarmament negotiations usually have low performance (even failing).
ISSN:0304-3878
1872-6089
DOI:10.1016/S0304-3878(02)00022-6