Military R&D, Growth and the Optimal Allocation of Governement Spending
AbstractThe purpose of the model developed in the paper is to provide a simple economic framework to address an economic policy question, namely the optimal size of military R&D investment within total public expenditures. To capture the long-run impact of military R&D on the growth rate of the economy, one develops an endogenous growth model in line with Barro  and Shieh & alii ; the model focuses on the optimal sharing of public resources between civil investments, public consumption, military R&D investment and “standard” military spending. It emphasizes the key role played by public military R&D investments in determining the longrun levels of economic growth and welfare. According to our numerical simulations — based on a very prudential set of assumptions concerning the economic impact of military R&D — a 3.65 billions euros permanent reallocation of public spending from civilian unproductive public consumption towards military R&D investment, would induce a 380 billions euros GDP discounted benefit over a decade. In such a framework, characterized by productive externalities originating in military R&D, the government optimal policy should be to massively invest in military R&D: a global tax rate below 12% would drive to a 5.6% GDP long-run yearly growth rate.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne in its series Documents de recherche with number 06-12.
Length: 27 pages
Date of creation: 2006
Date of revision:
endogenous growth; R&D; military expenditures; public spending;
Find related papers by JEL classification:
- D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- O32 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Management of Technological Innovation and R&D
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Maria Arrazola & Jose de Hevia, 2004. "More on the estimation of the human capital depreciation rate," Applied Economics Letters, Taylor & Francis Journals, vol. 11(3), pages 145-148.
- Robert J. Barro, 2013.
"Inflation and Economic Growth,"
Annals of Economics and Finance,
Society for AEF, vol. 14(1), pages 121-144, May.
- Ploeg, F. van der & Zeeuw, A.J. de, 1988.
"Perfect equilibrium in a model of competitive arms accumulation,"
1988-4, Tilburg University, Center for Economic Research.
- van der Ploeg, F & de Zeeuw, A J, 1990. "Perfect Equilibrium in a Model of Competitive Arms Accumulation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(1), pages 131-46, February.
- Ploeg, F. van der & Zeeuw, A.J. de, 1987. "Perfect equilibrium in a model of competitive arms accumulation," Research Memorandum 266, Tilburg University, Faculty of Economics and Business Administration.
- Ploeg, F. van der & Zeeuw , A.J. de, 1990. "Perfect equilibrium in a model of competitive arms accumulation," Open Access publications from Tilburg University urn:nbn:nl:ui:12-377522, Tilburg University.
- Sandler,Todd & Hartley,Keith, 1995. "The Economics of Defense," Cambridge Books, Cambridge University Press, number 9780521447287.
- N. Gregory Mankiw & David Romer & David N. Weil, 1990.
"A Contribution to the Empirics of Economic Growth,"
NBER Working Papers
3541, National Bureau of Economic Research, Inc.
- Zou, Heng-fu, 1995.
"A dynamic model of capital and arms accumulation,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 19(1-2), pages 371-393.
- Brumm, Harold J., 1997. "Military Spending, Government Disarray, and Economic Growth: A Cross-Country Empirical Analysis," Journal of Macroeconomics, Elsevier, vol. 19(4), pages 827-838, October.
- Barro, R.J., 1988.
"Government Spending In A Simple Model Of Endogenous Growth,"
RCER Working Papers
130, University of Rochester - Center for Economic Research (RCER).
- Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S103-26, October.
- Barro, Robert J., 1990. "Government Spending in a Simple Model of Endogeneous Growth," Scholarly Articles 3451296, Harvard University Department of Economics.
- Robert J. Barro, 1988. "Government Spending in a Simple Model of Endogenous Growth," NBER Working Papers 2588, National Bureau of Economic Research, Inc.
- Deger, Saadet & Sen, Somnath, 1983. "Military expenditure, spin-off and economic development," Journal of Development Economics, Elsevier, vol. 13(1-2), pages 67-83.
- Biswas, Basudeb & Ram, Rati, 1986. "Military Expenditures and Economic Growth in Less Developed Countries: An Augmented Model and Further Evidence," Economic Development and Cultural Change, University of Chicago Press, vol. 34(2), pages 361-72, January.
- Philippe Aghion & Peter Howitt, 1997. "Endogenous Growth Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262011662, December.
- Dakurah, A. Henry & Davies, Stephen P. & Sampath, Rajan K., 2001. "Defense spending and economic growth in developing countries: A causality analysis," Journal of Policy Modeling, Elsevier, vol. 23(6), pages 651-658, August.
- Brito, D L, 1972. "A Dynamic Model of an Armaments Race," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 13(2), pages 359-75, June.
- Deger, Saadet, 1986. "Economic Development and Defense Expenditure," Economic Development and Cultural Change, University of Chicago Press, vol. 35(1), pages 179-96, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Samuel Nosel).
If references are entirely missing, you can add them using this form.