Growth, political instability and the defense burden
This paper develops a model to examine the economic effects of political instability and military expenditure. In the model, "kleptocracies" use defense as "imperfect" insurance against the probability of being overthrown. Increasing defense has a secondary effect of augmenting the human capital stock (a spin-off effect). However, defense investment comes at the expense of consuming scarce resources (a crowding out effect). The paper's central contribution is to model each of these effects and their relationship to one another. The resulting theory predicts that the equilibrium is Pareto inefficient and that increased political instability and increased defense can inhibit economic growth. Empirically, increases in political instability are found to decrease growth while increases in defense are found to decrease political instability. The paper also finds that increases in defense have a direct negative effect on growth, although the relation is weak. The weak relation implies the aforementioned crowding out effect is largely mitigated by the spin-off effect.
(This abstract was borrowed from another version of this item.)
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||1994|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.newyorkfed.org/
More information through EDIRC
|Order Information:|| Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Alesina, Alberto, et al, 1996.
" Political Instability and Economic Growth,"
Journal of Economic Growth,
Springer, vol. 1(2), pages 189-211, June.
- Skaperdas, Stergios, 1991.
"Conflict and Attitudes toward Risk,"
American Economic Review,
American Economic Association, vol. 81(2), pages 116-20, May.
- Kenneth Rogoff & Anne Sibert, 1986.
"Elections and Macroeconomic Policy Cycles,"
NBER Working Papers
1838, National Bureau of Economic Research, Inc.
- Smith, Ron P, 1978. "Military Expenditure and Capitalism: A Reply," Cambridge Journal of Economics, Oxford University Press, vol. 2(3), pages 299-304, September.
- Smith, R P, 1980. "The Demand for Military Expenditure," Economic Journal, Royal Economic Society, vol. 90(363), pages 811-20, December.
- Rogoff, Kenneth, 1990.
"Equilibrium Political Budget Cycles,"
American Economic Review,
American Economic Association, vol. 80(1), pages 21-36, March.
- Newey, Whitney K., 1987. "Efficient estimation of limited dependent variable models with endogenous explanatory variables," Journal of Econometrics, Elsevier, vol. 36(3), pages 231-250, November.
- Blanchard, Olivier J, 1985.
"Debt, Deficits, and Finite Horizons,"
Journal of Political Economy,
University of Chicago Press, vol. 93(2), pages 223-47, April.
- Smith, R P, 1977. "Military Expenditure and Capitalism," Cambridge Journal of Economics, Oxford University Press, vol. 1(1), pages 61-76, March.
- Faini, Riccardo & Annez, Patricia & Taylor, Lance, 1984. "Defense Spending, Economic Structure, and Growth: Evidence among Countries and Over Time," Economic Development and Cultural Change, University of Chicago Press, vol. 32(3), pages 487-98, April.
- Londregan, J. & Poole, K.T., 1991. "The Seizure of Executive Power and Economic Growth: Some Additional Evidence," GSIA Working Papers 1991-6, Carnegie Mellon University, Tepper School of Business.
- Deger, Saadet, 1986. "Economic Development and Defense Expenditure," Economic Development and Cultural Change, University of Chicago Press, vol. 35(1), pages 179-96, October.
- Roubini, Nouriel & Swagel, Phillip & Ozler, Sule & Alesina, Alberto, 1996.
"Political Instability and Economic Growth,"
4553024, Harvard University Department of Economics.
- Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
- Smith, Ronald P., 1980. "Military expenditure and investment in OECD countries, 1954-1973," Journal of Comparative Economics, Elsevier, vol. 4(1), pages 19-32, March.
When requesting a correction, please mention this item's handle: RePEc:fip:fednrp:9420. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Amy Farber)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.