The production of national defense and the macroeconomy

Jose Torres ()

PLOS ONE, 2020, vol. 15, issue 10, 1-18

Abstract: This study investigates the interactions between defense production and the rest of the economy. We develop a two-sector dynamic stochastic general equilibrium model with military and nonmilitary production. Inputs (capital and labor) are distributed between the two sectors. Calibration of the model to key targets of the US economy results in an elasticity of substitution between consumption of goods and services and national defense services of 0.56. The estimated complementarity between consumption goods and defense services results in positive spillovers across military and final goods production sectors, even when the nonmilitary production function is not directly related to military spending. We find that military spending is procyclical and that military spending as a percentage of output is countercyclical. Finally, investment-specific technological shocks to military equipment have a positive impact on nonmilitary output, although they reduce business investment.

Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0240299 (text/html)
https://journals.plos.org/plosone/article/file?id= ... 40299&type=printable (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:plo:pone00:0240299

DOI: 10.1371/journal.pone.0240299

Access Statistics for this article

More articles in PLOS ONE from Public Library of Science
Bibliographic data for series maintained by plosone ().