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Tax Efficiency And Quality/Quantity Trade-Offs In Defense Procurement

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  • Jonathan Lipow
  • Yakir Plessner

Abstract

In the defense policy literature, it is widely believed that there is a pronounced bias towards the procurement of a less than optimal number of excessively sophisticated weapons. In this paper, we consider the possibility that this perceived bias is the result of the timing and informational structure of defense procurement decisions, and the interrelationship of this structure with overall fiscal policy. Specifically, this paper presents a model that suggests that tax smoothing considerations of the type first articulated in Barro (1979) could lead social welfare maximizing decision makers to choose a higher level of weapon quality than would be optimal if government revenue could be raised without resort to distortionary taxation.

Suggested Citation

  • Jonathan Lipow & Yakir Plessner, 2008. "Tax Efficiency And Quality/Quantity Trade-Offs In Defense Procurement," Defence and Peace Economics, Taylor & Francis Journals, vol. 19(1), pages 21-26.
    • Handle: RePEc:taf:defpea:v:19:y:2008:i:1:p:21-26
    DOI: 10.1080/10242690701348984
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    References listed on IDEAS

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    1. Barro, Robert J, 1979. "On the Determination of the Public Debt," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 940-971, October.
    2. Gregory Hildebrandt, 1999. "The military production function," Defence and Peace Economics, Taylor & Francis Journals, vol. 10(3), pages 247-272.
    3. Lucas, Robert Jr. & Stokey, Nancy L., 1983. "Optimal fiscal and monetary policy in an economy without capital," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 55-93.
    4. Jonathan Lipow & Eli Feinerman, 2001. "Better weapons or better troops?," Defence and Peace Economics, Taylor & Francis Journals, vol. 12(4), pages 271-284.
    5. Feinerman, Eli & Lipow, Jonathan, 2001. "Is there a bias toward excessive quality in defense procurement?," Economics Letters, Elsevier, vol. 71(1), pages 143-148, April.
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    Cited by:

    1. Marcus Matthias Keupp, 2021. "Introduction: The Fundamental Economic Problem of the Military," Springer Books, in: Defense Economics, chapter 0, pages 1-21, Springer.

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