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Defense Spending in a Neo‐Ricardian World

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  • Carlos Seiglie

Abstract

This paper shows that Ricardian equivalence no longer holds once we recognize that government acts as an intermediary between generations in the provision of national defence. Consequently, the level of public debt is positively related to defence spending since this component of government expenditures insures the transferability of bequests, as well as protecting savings. It is shown that defence spending has an adverse effect on both national saving and the saving rate that has not been considered in the economic growth literature. More generally, the paper emphasizes that in developing a positive theory of taxation, the composition of government spending plays an integral role.

Suggested Citation

  • Carlos Seiglie, 1998. "Defense Spending in a Neo‐Ricardian World," Economica, London School of Economics and Political Science, vol. 65(258), pages 193-210, May.
    • Handle: RePEc:bla:econom:v:65:y:1998:i:258:p:193-210
    DOI: 10.1111/1468-0335.00123
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    Cited by:

    1. Seiglie, Carlos & Liu, Peter C., 2002. "Arms races in the developing world: some policy implications," Journal of Policy Modeling, Elsevier, vol. 24(7-8), pages 693-705, November.
    2. Andreou Andreas S. & Zombanakis George A. & Migiakis Petros M., 2013. "On Defence Expenditure Reduction: Balancing Between Austerity and Security in Greece," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 19(3), pages 437-458, December.
    3. Oya Erdogdu, 2008. "Political Decisions, Defense And Growth," Defence and Peace Economics, Taylor & Francis Journals, vol. 19(1), pages 27-35.

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