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Capital Destruction, Optimal Defense and Economic Growth

Author

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  • Daniel Mejía
  • Carlos Posada

    ()

Abstract

The effects of capital destruction are endogenized in a neoclassical growth model where the economy can optimally allocate part of its labor force to defend capital from being destroyed. The purpose is to explain the optimal allocation of the labor force between productive and deterrence activities along the optimal growth path in response to exogenous terrorist attacks against the material wealth of the economy. The article makes special case to the recent Colombian case and sheds some light on the dramatic increase in the defense activities in Colombia as a result of the increase of terrorist attacks by rebeld groups.

Suggested Citation

  • Daniel Mejía & Carlos Posada, 2003. "Capital Destruction, Optimal Defense and Economic Growth," Borradores de Economia 257, Banco de la Republica de Colombia.
  • Handle: RePEc:bdr:borrec:257
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    References listed on IDEAS

    as
    1. Armando Montenegro & Carlos Esteban Posada, 1995. "Criminalidad en Colombia," COYUNTURA ECONÓMICA, FEDESARROLLO, March.
    2. Grossman, Herschel I & Kim, Minseong, 1996. "Predation and Accumulation," Journal of Economic Growth, Springer, vol. 1(3), pages 333-350, September.
    3. Robert J. Barro, 2003. "Nothing is Sacred: Economic Ideas for the New Millennium," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262524155, January.
    4. Carlos Esteban Posada & Francisco González, 2000. "El gasto en defensa, justicia y seguridad," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 2(2), pages 53-75, January-J.
    5. Alesina, Alberto & Özler, Sule & Roubini, Nouriel & Swagel, Phillip, 1996. "Political Instability and Economic Growth," Journal of Economic Growth, Springer, vol. 1(2), pages 189-211, June.
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    Citations

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    Cited by:

    1. Estrada G., Fernando, 2011. "The logic of the violence in the civil war: The armed conflict in Colombia," PERFIL DE COYUNTURA ECONÓMICA, UNIVERSIDAD DE ANTIOQUIA - CIE, June.
    2. Liu, Tao-Xiong & Hu, An-Gang & Zhou, Bi-Hua, 2011. "Defense Expenditure and Economic Growth under External Predation," MPRA Paper 29286, University Library of Munich, Germany.
    3. Hernando Zuleta & Juanita Villaveces, 2008. "Conflict and negotiation: a game theoretical approach," DOCUMENTOS DE TRABAJO 005148, UNIVERSIDAD DEL ROSARIO.
    4. Arias Andrés F. & Laura Ardila, 2003. "Military Expenditure and Economic Activity: The Colombian Case," REVISTA DESARROLLO Y SOCIEDAD, UNIVERSIDAD DE LOS ANDES-CEDE, September.
    5. Adriana Camacho & Catherine Rodriguez, 2013. "Firm Exit and Armed Conflict in Colombia," Journal of Conflict Resolution, Peace Science Society (International), vol. 57(1), pages 89-116, February.
    6. Julián David Parada, 2008. "Tasa de depreciación endógena y crecimiento económico," DOCUMENTOS DE TRABAJO 004594, UNIVERSIDAD DEL ROSARIO.
    7. Adriana Camacho Gonzalez, 2007. "Stress and birth outcomes evidence from terrorist attacks in Colombia," DOCUMENTOS DE ECONOMÍA 003945, UNIVERSIDAD JAVERIANA - BOGOTÁ.
    8. Estrada, Fernando, 2011. "Heuristic Schelling: economy of organized crime," MPRA Paper 31306, University Library of Munich, Germany.

    More about this item

    Keywords

    Capital accumulation; deterrence; capital destruction and economic growth.;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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