Does Defense Spending Surprise Long-Run Inflation, Economic Growth and Welfare?

Hung-Pin Lin ()
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Hung-Pin Lin: Department of International Business & Trade, Shu-Te University,Taiwan

Economics Bulletin, 2012, vol. 32, issue 1, 1020-1031

Abstract: This paper sets up an endogenous growth model to examine the effects of an expansion of defense spending share on inflation, economic growth and welfare. It is found that: (i) an increase of defense spending share will lower the inflation rate and stimulate the economic growth. (ii) from the perspective of maximum social welfare, a“large”enough redistribution of the government spending from defense sector to public sector will promote the social welfare. These can be explained why the arms race and disarmament are advocated in recent years.

Keywords: Defense spending; Inflation rate; Economic growth; Social welfare. (search for similar items in EconPapers)
JEL-codes: C6 E6 (search for similar items in EconPapers)
Date: 2012-03-28
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