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The Economic Effects of Reduced Defense Expenditures: An Applied General Equilibrium Analysis

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  • Donald N. Baum

    (University of Nebraska at Omaha, Economics)

Abstract

This paper employs an applied general equilibrium model to simulate the long-run effects of reductions in U.S. defense expenditures. In the long-run these reductions significantly affect only the output of the defense and government industries, and do not significantly affect the distribution of income or the relative price of capital and labor. The structure of the tax or expenditure changes which accompany defense reductions may cause large allocative and distributional effects. Thus, the fiscal decisions which accompany defense expenditure reductions are the key to determining their impact.

Suggested Citation

  • Donald N. Baum, 1993. "The Economic Effects of Reduced Defense Expenditures: An Applied General Equilibrium Analysis," Conflict Management and Peace Science, Peace Science Society (International), vol. 12(2), pages 65-88, February.
    • Handle: RePEc:sae:compsc:v:12:y:1993:i:2:p:65-88
    DOI: 10.1177/073889429301200203
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    References listed on IDEAS

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    1. Jon D. Haveman & Alan V. Deardorff & Robert M. Stern, 1992. "Some Economic Effects of Unilateral and Multilateral Reductions in Military Expenditures in the Major Industrialized and Developing Countries," Conflict Management and Peace Science, Peace Science Society (International), vol. 12(1), pages 47-78, February.
    2. Ballard, Charles L. & Fullerton, Don & Shoven, John B. & Whalley, John, 2009. "A General Equilibrium Model for Tax Policy Evaluation," National Bureau of Economic Research Books, University of Chicago Press, number 9780226036335, December.
    3. G. Adams & D. A. Gold, 1987. "The Economics of Military Spending: Is the Military Dollar Really Different," International Economic Association Series, in: Christian Schmidt & Frank Blackaby (ed.), Peace, Defence and Economic Analysis, chapter 13, pages 266-301, Palgrave Macmillan.
    4. Shoven, John B & Whalley, John, 1984. "Applied General-Equilibrium Models of Taxation and International Trade: An Introduction and Survey," Journal of Economic Literature, American Economic Association, vol. 22(3), pages 1007-1051, September.
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