A dynamic model of capital and arms accumulation
AbstractHow does competitive arms accumulation affect investment and capital accumulation? In a dynamic optimization framework including both investment and military spending, we find that, when the utility function is separable between consumption and the weapon stocks, an unanticipated rise in current military threat reduces current investment and an anticipated rise in future military threat stimulates current investment. But when the utility function is nonseparable between consumption and the weapon stocks, a current military threat may not decrease the short-run investment. In the long run, capital accumulation is independent of the military conflicts among countries regardless of the form of the utility function.
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Bibliographic InfoPaper provided by China Economics and Management Academy, Central University of Finance and Economics in its series CEMA Working Papers with number 80.
Length: 23 pages
Date of creation: 1995
Date of revision:
Publication status: Published in Journal of Economic Dynamics and Control, Volume 19, Issues 1-2, January-February 1995, Pages 371-393
Capital accumulation; Military spending; Economic growth; Arms race;
Other versions of this item:
- E20 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
- E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
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