Military Expenditure and Economic Activity: The Colombian Case
We enhance a standard RBC model to account for military expenditure and the costs of an internal conflict or war. The model captures the natural trade-off in military expenditure: crowding out of private consumption and investment but less destruction (and, therefore, higher marginal productivity) of private capital (and labor). Hence, military expenditure below (above) a certain threshold generates a positive (negative) net benefit in terms of output. The model is calibrated to an annual frequency using Colombian data. We find that an increase in military expenditure of 1% GDP (the current policy of Colombian authorities) increases investment and output above the steady state during several periods, before the shock fades away. Even though consumption falls on impact (to open up space for the additional military expenditure and private investment), it increases above its stationary trend after three periods, remains on positive grounds thereafter, and the cumulated net gain is positive.
Volume (Year): (2003)
Issue (Month): ()
|Contact details of provider:|| |
References listed on IDEAS
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.:
- Malcolm D. Knight & Delano Villanueva & Norman Loayza, 1995.
"The Peace Dividend; Military Spending Cuts and Economic Growth,"
IMF Working Papers
95/53, International Monetary Fund.
- Malcolm Knight & Norman Loayza & Delano Villanueva, 1996. "The Peace Dividend: Military Spending Cuts and Economic Growth," IMF Staff Papers, Palgrave Macmillan, vol. 43(1), pages 1-37, March.
- Knight, Malcolm & Loayza, Norman & Villanueva, Delano, 1996. "The peace dividend : military spending cuts and economic growth," Policy Research Working Paper Series 1577, The World Bank.
- Aizenman, Joshua & Glick, Reuven, 2003.
"Military Expenditure, Threats, and Growth,"
Santa Cruz Center for International Economics, Working Paper Series
qt41r4105h, Center for International Economics, UC Santa Cruz.
- Joshua Aizenman & Reuven Glick, 2006. "Military expenditure, threats, and growth," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 15(2), pages 129-155.
- Joshua Aizenman & Reuven Glick, 2003. "Military Expenditure, Threats, and Growth," NBER Working Papers 9618, National Bureau of Economic Research, Inc.
- Joshua Aizenman & Reuven Glick, 2003. "Military expenditure, threats, and growth," Working Paper Series 2003-08, Federal Reserve Bank of San Francisco.
- Aizenman, Joshua & Glick, Reuven, 2003. "Military Expenditure, Threats, and Growth," Santa Cruz Department of Economics, Working Paper Series qt41r4105h, Department of Economics, UC Santa Cruz.
- Kosuke Imai & Jeremy M. Weinstein, 2000. "Measuring the Economic Impact of Civil War," CID Working Papers 51, Center for International Development at Harvard University.
- Michael D. Stroup & Jac C. Heckelman, 2001. "Size Of The Military Sector And Economic Growth: A Panel Data Analysis Of Africa And Latin America," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 329-360, November.
- Daniel Mejía & Carlos Posada, .
"Capital Destruction, Optimal Defense and Economic Growth,"
Borradores de Economia
257, Banco de la Republica de Colombia.
- Daniel Mejía & Carlos Esteban Posada, 2003. "Capital Destruction, Optimal Defense and Economic Growth," BORRADORES DE ECONOMIA 002096, BANCO DE LA REPÚBLICA.
- Collier, Paul & Hoeffler, Anke, 1998. "On Economic Causes of Civil War," Oxford Economic Papers, Oxford University Press, vol. 50(4), pages 563-73, October.
When requesting a correction, please mention this item's handle: RePEc:col:000090:003895. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Universidad De Los Andes-Cede)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.