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The Economics of War: Militarization and Growth in an AK Economy

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  • Arpan Chakraborty

Abstract

This paper analyzes the macroeconomic consequences of military spending and militarization within a dynamic growth framework. Building on a Keynesian goods-market model, we examine how the allocation of government expenditure between civilian and military sectors affects capital accumulation and technological progress. Military spending generates opposing effects: it stimulates aggregate demand and may support innovation through defense-related research, but it also crowds out civilian investment and creates structural rigidities. We formalize these mechanisms in a stylized endogenous-growth model in which productivity depends on the degree of militarization, producing a non-linear relationship between the military burden and long-run growth. Calibrated simulations show that moderate levels of military spending can temporarily support growth, whereas excessive militarization reduces long-run development. We further illustrate the asymmetric growth costs of conflict using a simple two-country war simulation between an advanced economy and a sanctioned middle-income economy.

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  • Arpan Chakraborty, 2026. "The Economics of War: Militarization and Growth in an AK Economy," Papers 2603.23980, arXiv.org.
    • Handle: RePEc:arx:papers:2603.23980
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    References listed on IDEAS

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    1. J. Paul Dunne & Ron Smith & Dirk Willenbockel, 2005. "Models Of Military Expenditure And Growth: A Critical Review," Defence and Peace Economics, Taylor & Francis Journals, vol. 16(6), pages 449-461.
    2. 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 103-126, October.
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