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Technology of military conflict, military spending, and war

  • Hwang, Sung-Ha

This paper studies how the technology of military conflict affects the allocation of resources in military spending (“guns”) and productive investment (“butter”). We first identify the fundamental property of conflict technology which the two commonly used contest success functions, the difference and ratio forms, share. Using this property, named the constant elasticity of augmentation, we construct a new class of contest success functions, hence generalizing the two forms. We provide axiomatic and probabilistic characterizations of the new contest success function. Then, adopting the new contest success function, we study how the elasticity of augmentation affects the trade-off between guns and butter, and countries' international policy to settle or wage a war. Finally, we estimate the elasticity of augmentation using actual battle data including seventeenth-century European battles and World War II battles and explore the implications of the estimated parameters of military technology on military spending and the preference of settlement.

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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 96 (2012)
Issue (Month): 1 ()
Pages: 226-236

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Handle: RePEc:eee:pubeco:v:96:y:2012:i:1:p:226-236
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

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  1. Konrad, Kai A., 2009. "Strategy and Dynamics in Contests," OUP Catalogue, Oxford University Press, number 9780199549603, March.
  2. Johannes Münster, 2009. "Group contest success functions," Economic Theory, Springer, vol. 41(2), pages 345-357, November.
  3. Alesina, Alberto & Spolaore, Enrico, 2005. "War, peace, and the size of countries," Journal of Public Economics, Elsevier, vol. 89(7), pages 1333-1354, July.
  4. Che,Y.K. & Gale,I., 1998. "Difference-form contests and the robustness of all-pay auctions," Working papers 6, Wisconsin Madison - Social Systems.
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  8. Baik, Kyung Hwan, 1998. "Difference-form contest success functions and effort levels in contests," European Journal of Political Economy, Elsevier, vol. 14(4), pages 685-701, November.
  9. Skaperdas, S., 1991. "Cooperation, Conflict And Power In The Absence Of Property Rights," Papers 90-91-06a, California Irvine - School of Social Sciences.
  10. Jack Hirshleifer, 1989. "Conflict and rent-seeking success functions: Ratio vs. difference models of relative success," Public Choice, Springer, vol. 63(2), pages 101-112, November.
  11. Colin Camerer & Teck-Hua Ho, 1999. "Experience-weighted Attraction Learning in Normal Form Games," Econometrica, Econometric Society, vol. 67(4), pages 827-874, July.
  12. Brzoska, Michael, 1995. "World military expenditures," Handbook of Defense Economics, in: Keith Hartley & Todd Sandler (ed.), Handbook of Defense Economics, edition 1, volume 1, chapter 3, pages 45-67 Elsevier.
  13. Fearon, James D., 1995. "Rationalist explanations for war," International Organization, Cambridge University Press, vol. 49(03), pages 379-414, June.
  14. Jack Hirshleifer, 1991. "The Paradox Of Power," Economics and Politics, Wiley Blackwell, vol. 3(3), pages 177-200, November.
  15. Michelle R. Garfinkel & Stergios Skaperdas, 2006. "Economics of Conflict: An Overview," Working Papers 050623, University of California-Irvine, Department of Economics, revised Sep 2006.
  16. Hirshleifer, Jack, 1991. "The Technology of Conflict as an Economic Activity," American Economic Review, American Economic Association, vol. 81(2), pages 130-34, May.
  17. Jack Hirshleifer, 1995. "Theorizing About Conflict," UCLA Economics Working Papers 727, UCLA Department of Economics.
  18. Garfinkel, Michelle R, 1990. "Arming as a Strategic Investment in a Cooperative Equilibrium," American Economic Review, American Economic Association, vol. 80(1), pages 50-68, March.
  19. Hirshleifer, Jack, 1995. "Theorizing about conflict," Handbook of Defense Economics, in: Keith Hartley & Todd Sandler (ed.), Handbook of Defense Economics, edition 1, volume 1, chapter 7, pages 165-189 Elsevier.
  20. Dan Reiter & Allan C. Stam III, 1998. "Democracy and Battlefield Military Effectiveness," Journal of Conflict Resolution, Peace Science Society (International), vol. 42(3), pages 259-277, June.
  21. Hao Jia, 2008. "A stochastic derivation of the ratio form of contest success functions," Public Choice, Springer, vol. 135(3), pages 125-130, June.
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