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Defense Expenditure and Economic Growth under External Predation

  • Liu, Tao-Xiong
  • Hu, An-Gang
  • Zhou, Bi-Hua

This paper develops a growth model of a country under a Hobbesian environment with international conflicts where national defense is the only way to prevent external predation. The long run growth path is determined by the equilibrium of a dynamic game with three players, the external predator, the government and the family. The equilibrium growth path has three phases, submissive equilibrium, tolerant equilibrium and full-protected equilibrium. Different defense strategies result in different growth prospects and sustainable growth will endogenously induce adjustment of defense strategies.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 29286.

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Date of creation: 07 Jan 2011
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Handle: RePEc:pra:mprapa:29286
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  1. Thompson, Earl A, 1974. "Taxation and National Defense," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 755-82, July/Aug..
  2. Herschel I. Grossman & Minseong Kim, 1995. "Predation and Accumulation," NBER Working Papers 5357, National Bureau of Economic Research, Inc.
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  7. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, December.
  8. Appelbaum, Elie & Katz, Eliakim, 1987. "Seeking Rents by Setting Rents: The Political Economy of Rent Seeking," Economic Journal, Royal Economic Society, vol. 97(387), pages 685-99, September.
  9. Glenn C. Loury, 1979. "Market Structure and Innovation," The Quarterly Journal of Economics, Oxford University Press, vol. 93(3), pages 395-410.
  10. Garfinkel, Michelle R, 1990. "Arming as a Strategic Investment in a Cooperative Equilibrium," American Economic Review, American Economic Association, vol. 80(1), pages 50-68, March.
  11. Baik, Kyung Hwan, 1998. "Difference-form contest success functions and effort levels in contests," European Journal of Political Economy, Elsevier, vol. 14(4), pages 685-701, November.
  12. Grossman, Herschel I & Kim, Minseong, 1995. "Swords or Plowshares? A Theory of the Security of Claims to Property," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1275-88, December.
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