Technology of military con ict, military spending, and war
This paper studies how the technology of military con ict a ects the allocation of resources in military spending (\guns") and productive investment (\butter"). We rst identify the fundamental property of con ict technology which the two commonly used contest success functions, the di erence and ratio forms, share. Using this property, named the constant elasticity of augmentation, we construct a new class of contest success functions, hence generalizing the two forms. We provide axiomatic and probabilistic characterizations of the new contest success function. Then, adopting the new contest success function, we study how the elasticity of augmentation a ects the trade-o between guns and butter, and countries' international policy to settle or wage a war. Finally, we estimate the elasticity of augmentation using actual battle data including seventeenth-century European battles and World War II battles and explore the implications of the estimated parameters of military technology on military spending and the preference of settlement.
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