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Does Defense Spending Surprise Long-Run Inflation, Economic Growth and Welfare?

  • Hung-Pin Lin

    ()

    (Department of International Business & Trade, Shu-Te University,Taiwan)

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    This paper sets up an endogenous growth model to examine the effects of an expansion of defense spending share on inflation, economic growth and welfare. It is found that: (i) an increase of defense spending share will lower the inflation rate and stimulate the economic growth. (ii) from the perspective of maximum social welfare, a“large”enough redistribution of the government spending from defense sector to public sector will promote the social welfare. These can be explained why the arms race and disarmament are advocated in recent years.

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    File URL: http://www.accessecon.com/Pubs/EB/2012/Volume32/EB-12-V32-I1-P97.pdf
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    Article provided by AccessEcon in its journal Economics Bulletin.

    Volume (Year): 32 (2012)
    Issue (Month): 1 ()
    Pages: 1020-1031

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    Handle: RePEc:ebl:ecbull:eb-11-00603
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    1. Futagami, Koichi & Morita, Yuichi & Shibata, Akihisa, 1993. " Dynamic Analysis of an Endogenous Growth Model with Public Capital," Scandinavian Journal of Economics, Wiley Blackwell, vol. 95(4), pages 607-25, December.
    2. N. Gregory Mankiw, 1986. "Government Purchases and Real Interest Rates," NBER Working Papers 2009, National Bureau of Economic Research, Inc.
    3. Shieh, Jhy-yuan & Lai, Ching-chong & Chang, Wen-ya, 2002. "The impact of military burden on long-run growth and welfare," Journal of Development Economics, Elsevier, vol. 68(2), pages 443-454, August.
    4. Robert J. Barro, 1995. "Inflation and Economic Growth," NBER Working Papers 5326, National Bureau of Economic Research, Inc.
    5. repec:cup:cbooks:9780521447287 is not listed on IDEAS
    6. Deger, Saadet & Sen, Somnath, 1983. "Military expenditure, spin-off and economic development," Journal of Development Economics, Elsevier, vol. 13(1-2), pages 67-83.
    7. Ching-chong Lai & Jhy-yuan Shieh & Wen-Ya Chang, 2002. "Endogenous Growth and Defense Expenditures: A New Explanation of the Benoit Hypothesis," Defence and Peace Economics, Taylor & Francis Journals, vol. 13(3), pages 179-186.
    8. repec:ner:tilbur:urn:nbn:nl:ui:12-377522 is not listed on IDEAS
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