TAX EFFICIENCY AND QUALITY/QUANTITY TRADE-OFFS IN DEFENSE PROCUREMENT

Jonathan Lipow and Yakir Plessner

Defence and Peace Economics, 2008, vol. 19, issue 1, 21-26

Abstract: In the defense policy literature, it is widely believed that there is a pronounced bias towards the procurement of a less than optimal number of excessively sophisticated weapons. In this paper, we consider the possibility that this perceived bias is the result of the timing and informational structure of defense procurement decisions, and the interrelationship of this structure with overall fiscal policy. Specifically, this paper presents a model that suggests that tax smoothing considerations of the type first articulated in Barro (1979) could lead social welfare maximizing decision makers to choose a higher level of weapon quality than would be optimal if government revenue could be raised without resort to distortionary taxation.

Keywords: Defense procurement; Weapon quality; Tax smoothing (search for similar items in EconPapers)
Date: 2008
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DOI: 10.1080/10242690701348984

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