Defense Strategy Transition and Economic Growth Under External Predation

Taoxiong Liu and Bihua Zhou

Defence and Peace Economics, 2015, vol. 26, issue 3, 289-309

Abstract: This paper develops a growth model for a country under a Hobbesian environment with international conflicts where national defense is the only way to prevent external predation. Different defense strategies result in different growth paths. The long-run growth path is determined by the equilibrium of a dynamic game with three players: the external predator, the government, and the family. The equilibrium growth path can have different phases: submissive equilibrium, tolerant equilibrium, and complete protection equilibrium. Sustainable growth will endogenously induce an adjustment of the defense strategies. As the economy keeps growing, complete protection will eventually be preferred. The optimal growth path prefers to compress the length of the transitional period between incomplete protection and complete protection. Some interesting features of the transitional dynamics are exhibited by a control model with discontinuity.

Date: 2015
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DOI: 10.1080/10242694.2013.763636

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