A Public Finance Perspective on Defense Spending

Felix Bierbrauer, Pierre Boyer, Andreas Peichl and Paul Vanborre
Additional contact information
Felix Bierbrauer: Université de Cologne
Andreas Peichl: LMU - Ludwig Maximilian University [Munich] = Ludwig Maximilians Universität München
Paul Vanborre: CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - Groupe ENSAE-ENSAI - Groupe des Écoles Nationales d'Économie et Statistique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - Groupe ENSAE-ENSAI - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique

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Abstract: How much defense spending should we provide, and how should we finance it? How much political support among citizens for defense spending should we expect? These are pressing questions to address as defense spending is set to go up substantively in the coming years with the goal of achieving self-sufficiency and EU sovereignty. National defense is the textbook example of a pure public good. We review insights from the theory of pure public goods to identify challenges for an efficient provision and financing of national defense. Key insights are: (i) The citizens' willingness to pay taxes for national defense depends on the design of distributive policies (ii) Pareto efficiency requires responsiveness to the preferences of citizens who pay for public goods via the tax system, (iii) An increase of national defense spending may go hand-in-hand with additional redistribution and (iv) uncertainty about the citizens' willingness to pay for increased defense spending implies uncertainty about the political feasibility of reform packages.

Date: 2025-06
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-05543774v1
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Published in 2025

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Journal Article: A Public Finance Perspective on Defense Spending (2025)
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