Capital Destruction, Optimal Defense and Economic Growth
AbstractThe effects of capital destruction are endogenized in a neoclassical growth model where the economy can optimally allocate part of its labor force to defend capital from being destroyed. The purpose is to explain the optimal allocation of the labor force between productive and deterrence activities along the optimal growth path in response to exogenous terrorist attacks against the material wealth of the economy. The article makes special case to the recent Colombian case and sheds some light on the dramatic increase in the defense activities in Colombia as a result of the increase of terrorist attacks by rebel groups.
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Bibliographic InfoPaper provided by BANCO DE LA REPÚBLICA in its series BORRADORES DE ECONOMIA with number 002096.
Date of creation: 31 Aug 2003
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- Daniel Mejía & Carlos Posada, . "Capital Destruction, Optimal Defense and Economic Growth," Borradores de Economia 257, Banco de la Republica de Colombia.
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
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