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Militarization and Capital Accumulation: A Mean Field Game of Symmetric Nations under Strategic Externalities

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  • Heng-fu Zou

Abstract

This paper develops a dynamic mean field game model of capital accumulation and militarization among symmetric countries facing stochastic shocks. Each country optimizes consumption, productive investment, and military spending while responding to the average militarization level of others. We derive the coupled Hamilton-Jacobi-Bellman and Fokker- Planck equations governing equilibrium, and prove existence and unique ness under strategic externalities. A linear-quadratic-Gaussian version yields closed-form feedback rules and forward dynamics. Simulations reveal that low internalization of global militarization leads to arms traps and stagnation, while stronger externality awareness supports growth and restraint. The model offers a rigorous framework to study decentralized security dilemmas and their macroeconomic consequences without assuming hierarchy or conflict.

Suggested Citation

  • Heng-fu Zou, 2025. "Militarization and Capital Accumulation: A Mean Field Game of Symmetric Nations under Strategic Externalities," CEMA Working Papers 761, China Economics and Management Academy, Central University of Finance and Economics.
    • Handle: RePEc:cuf:wpaper:761
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