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Capital Destruction, Optimal Defense and Economic Growth

  • Daniel Mejía

    ()

  • Carlos Esteban Posada

    ()

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 rebel groups.

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Paper provided by BANCO DE LA REPÚBLICA in its series BORRADORES DE ECONOMIA with number 002096.

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Length: 34
Date of creation: 31 Aug 2003
Date of revision:
Handle: RePEc:col:000094:002096
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  1. 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, June.
  2. 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.
  3. Carlos Esteban Posada & Armando Montenegro, 1994. "Criminalidad En Colombia," BORRADORES DE ECONOMIA 002239, BANCO DE LA REPÚBLICA.
  4. Herschel I. Grossman & Minseong Kim, 1995. "Predation and Accumulation," NBER Working Papers 5357, National Bureau of Economic Research, Inc.
  5. Roubini, Nouriel & Swagel, Phillip & Ozler, Sule & Alesina, Alberto, 1996. "Political Instability and Economic Growth," Scholarly Articles 4553024, Harvard University Department of Economics.
  6. Alesina, Alberto, et al, 1996. " Political Instability and Economic Growth," Journal of Economic Growth, Springer, vol. 1(2), pages 189-211, June.
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