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The Military Multiplier

Author

Listed:
  • Anastasiia Antonova
  • Ralph Luetticke
  • Gernot J. Muller
  • Gernot Müller

Abstract

What determines the effectiveness of military buildups? We introduce the concept of the military multiplier: the percentage increase in military equipment an additional dollar buys. It varies with the costs of allocating resources to military production, depending, among other things, on the industrial structure and capital reallocation frictions. We show that the response of military-goods prices to military buildups is a sufficient statistic for the military multiplier and that it has declined over time in the US. Using a calibrated multi-sector business cycle model, we show this decline stems from the economy’s structural shift toward the service sector.

Suggested Citation

  • Anastasiia Antonova & Ralph Luetticke & Gernot J. Muller & Gernot Müller, 2025. "The Military Multiplier," CESifo Working Paper Series 11882, CESifo.
    • Handle: RePEc:ces:ceswps:_11882
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    Keywords

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    JEL classification:

    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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