Military Expenditure and Economic Activity: The Colombian Case
AbstractWe enhance a standard RBC model to account for military expenditure and the costs of an internal conflict or war. The model captures the natural trade-off in military expenditure: crowding out of private consumption and investment but less destruction (and, therefore, higher marginal productivity) of private capital (and labor). Hence, military expenditure below (above) a certain threshold generates a positive (negative) net benefit in terms of output. The model is calibrated to an annual frequency using Colombian data. We find that an increase in military expenditure of 1% GDP (the current policy of Colombian authorities) increases investment and output above the steady state during several periods, before the shock fades away. Even though consumption falls on impact (to open up space for the additional military expenditure and private investment), it increases above its stationary trend after three periods, remains on positive grounds thereafter, and the cumulated net gain is positive.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by UNIVERSIDAD DE LOS ANDES-CEDE in its journal REVISTA DESARROLLO Y SOCIEDAD.
Volume (Year): (2003)
Issue (Month): ()
Contact details of provider:
Real business cycle; stationary state; military expenditure; crowding-out; productivity shock;
Find related papers by JEL classification:
- E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
- N4 - Economic History - - Government, War, Law, International Relations, and Regulation
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Collier, Paul & Hoeffler, Anke, 1998. "On Economic Causes of Civil War," Oxford Economic Papers, Oxford University Press, vol. 50(4), pages 563-73, October.
- Aizenman, Joshua & Glick, Reuven, 2003.
"Military Expenditure, Threats, and Growth,"
Santa Cruz Center for International Economics, Working Paper Series
qt41r4105h, Center for International Economics, UC Santa Cruz.
- Joshua Aizenman & Reuven Glick, 2006. "Military expenditure, threats, and growth," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 15(2), pages 129-155.
- Joshua Aizenman & Reuven Glick, 2003. "Military expenditure, threats, and growth," Working Paper Series 2003-08, Federal Reserve Bank of San Francisco.
- Aizenman, Joshua & Glick, Reuven, 2003. "Military Expenditure, Threats, and Growth," Santa Cruz Department of Economics, Working Paper Series qt41r4105h, Department of Economics, UC Santa Cruz.
- Joshua Aizenman & Reuven Glick, 2003. "Military Expenditure, Threats, and Growth," NBER Working Papers 9618, National Bureau of Economic Research, Inc.
- Daniel Mejía & Carlos Esteban Posada, 2003.
"Capital Destruction, Optimal Defense and Economic Growth,"
BORRADORES DE ECONOMIA
002096, BANCO DE LA REPÚBLICA.
- Daniel Mejía & Carlos Posada, . "Capital Destruction, Optimal Defense and Economic Growth," Borradores de Economia 257, Banco de la Republica de Colombia.
- Michael D. Stroup & Jac C. Heckelman, 2001. "Size Of The Military Sector And Economic Growth: A Panel Data Analysis Of Africa And Latin America," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 329-360, November.
- Kosuke Imai & Jeremy M. Weinstein, 2000. "Measuring the Economic Impact of Civil War," CID Working Papers 51, Center for International Development at Harvard University.
- Malcolm Knight & Norman Loayza & Delano Villanueva, 1996.
"The Peace Dividend: Military Spending Cuts and Economic Growth,"
IMF Staff Papers,
Palgrave Macmillan, vol. 43(1), pages 1-37, March.
- Knight, Malcolm & Loayza, Norman & Villanueva, Delano, 1996. "The peace dividend : military spending cuts and economic growth," Policy Research Working Paper Series 1577, The World Bank.
- repec:fth:oxesaf:95-8 is not listed on IDEAS
- Stéphane Auray & Aurélien Eyquem & Frédéric Jouneau-Sion, 2009. "Riots, Battles and Cycles," Cahiers de recherche 09-01, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke, revised 05 Apr 2009.
- World Bank, 2005. "Colombia : Public Expenditure Review," World Bank Other Operational Studies 8559, The World Bank.
- Andres F. Arias & Hernan Maldonado, 2004. "FARC Terrorism in Colombia: A Clustering Analysis," INVESTIGACIÃN ECONÃMICA EN COLOMBIA 002715, FUNDACIÓN PONDO.
- Andrés Felipe Mora Cortés, 2013. "Conflicto, violencia socioeconómica y desplazamiento forzado en Colombia," REVISTA CUADERNOS DE ECONOMÍA, UN - RCE - CID.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Universidad De Los Andes-Cede).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.