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Capital Destruction, Optimal Defense and Economic Growth

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  • Daniel Mejía

    ()

  • Carlos Esteban Posada

    ()

Abstract

The 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 Info

Paper provided by BANCO DE LA REPÚBLICA in its series BORRADORES DE ECONOMIA with number 002096.

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Length: 34
Date of creation: 31 Aug 2003
Date of revision:
Handle: RePEc:col:000094:002096

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Keywords: Capital Accumulation;

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References

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  1. Roubini, Nouriel & Swagel, Phillip & Ozler, Sule & Alesina, Alberto, 1996. "Political Instability and Economic Growth," Scholarly Articles 4553024, Harvard University Department of Economics.
  2. Armando Montenegro & Carlos Esteban Posada, . "Criminalidad en Colombia," Borradores de Economia 004, Banco de la Republica de Colombia.
  3. Robert J. Barro, 2003. "Nothing is Sacred: Economic Ideas for the New Millennium," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262524155, December.
  4. Herschel I. Grossman & Minseong Kim, 1995. "Predation and Accumulation," NBER Working Papers 5357, National Bureau of Economic Research, Inc.
  5. Carlos Esteban Posada & Francisco González, 2000. "El gasto en defensa, justicia y seguridad," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, Universidad Externado de Colombia - Facultad de Economía, vol. 2(2), pages 53-75, January-J.
  6. Alesina, Alberto, et al, 1996. " Political Instability and Economic Growth," Journal of Economic Growth, Springer, Springer, vol. 1(2), pages 189-211, June.
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Citations

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Cited by:
  1. Camacho, Andriana & Rodriguez, Catherine, 2010. "Firm Exit and Armed Conflict in Colombia," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) wp2010-94, World Institute for Development Economic Research (UNU-WIDER).
  2. Adriana Camacho Gonzalez, 2007. "Stress and birth outcomes evidence from terrorist attacks in Colombia," DOCUMENTOS DE ECONOMÍA 003945, UNIVERSIDAD JAVERIANA - BOGOTÁ.
  3. Estrada, Fernando, 2011. "The logic of the violence in the civil war: the armed conflict in Colombia," MPRA Paper 29685, University Library of Munich, Germany.
  4. Hernando Zuleta & Juanita Villaveces, 2008. "Conflict and negotiation: a game theoretical approach," DOCUMENTOS DE TRABAJO, UNIVERSIDAD DEL ROSARIO 005148, UNIVERSIDAD DEL ROSARIO.
  5. Julián David Parada, 2008. "Tasa de depreciación endógena y crecimiento económico," DOCUMENTOS DE TRABAJO, UNIVERSIDAD DEL ROSARIO 004594, UNIVERSIDAD DEL ROSARIO.
  6. Arias Andrés F. & Laura Ardila, 2003. "Military Expenditure and Economic Activity: The Colombian Case," REVISTA DESARROLLO Y SOCIEDAD, UNIVERSIDAD DE LOS ANDES-CEDE.
  7. Estrada, Fernando, 2011. "Heuristic Schelling: economy of organized crime," MPRA Paper 31306, University Library of Munich, Germany.
  8. Liu, Tao-Xiong & Hu, An-Gang & Zhou, Bi-Hua, 2011. "Defense Expenditure and Economic Growth under External Predation," MPRA Paper 29286, University Library of Munich, Germany.

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