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Does Defense Spending Surprise Long-Run Inflation, Economic Growth and Welfare?

Author

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  • Hung-Pin Lin

    (Department of International Business & Trade, Shu-Te University,Taiwan)

Abstract

This paper sets up an endogenous growth model to examine the effects of an expansion of defense spending share on inflation, economic growth and welfare. It is found that: (i) an increase of defense spending share will lower the inflation rate and stimulate the economic growth. (ii) from the perspective of maximum social welfare, a“large”enough redistribution of the government spending from defense sector to public sector will promote the social welfare. These can be explained why the arms race and disarmament are advocated in recent years.

Suggested Citation

  • Hung-Pin Lin, 2012. "Does Defense Spending Surprise Long-Run Inflation, Economic Growth and Welfare?," Economics Bulletin, AccessEcon, vol. 32(1), pages 1020-1031.
    • Handle: RePEc:ebl:ecbull:eb-11-00603
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Defense spending; Inflation rate; Economic growth; Social welfare.;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling

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