A Model of Military Spending and Economic Growth

Richard Cothren

Public Choice, 2002, vol. 110, issue 1-2, 41 pages

Abstract: This paper investigates a model of military conflict between two regimes in which each may initiate combat in order to confiscate resources from the other. Conflict, or the potential for same, results in wasteful military spending which lowers growth for each regime. Equilibrium military spending is determined in a one-shot game. Analysis of the one-shot game is followed by a study of the prospects for an equilibrium in which regimes lower military spending and do not engage in combat in repeated play. In this latter case, military spending will be decreased to a level just sufficient to deter deviations from the no-combat equilibrium. This minimum level increases,and growth decreases, with the internal political instability of each regime. Moreover, an exogenous increase in the defensive capability of each regime may either increase or decrease growth, depending upon the initial level of military spending and growth. Copyright 2002 by Kluwer Academic Publishers

Date: 2002
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