Capital Destruction, Optimal Defense and Economic Growth

Daniel Mejia and Carlos Posada

Borradores de Economia from Banco de la Republica de Colombia

Abstract: The effects of capital destruction are endogenized in a neoclassical growth model where the economy can optimally allocate part of its labor force to defend capital from being destroyed. The purpose is to explain the optimal allocation of the labor force between productive and deterrence activities along the optimal growth path in response to exogenous terrorist attacks against the material wealth of the economy. The article makes special case to the recent Colombian case and sheds some light on the dramatic increase in the defense activities in Colombia as a result of the increase of terrorist attacks by rebeld groups.

Keywords: Capital accumulation; deterrence; capital destruction and economic growth. (search for similar items in EconPapers)
JEL-codes: D23 D74 E21 O41 (search for similar items in EconPapers)
Date: 2003-09
New Economics Papers: this item is included in nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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https://doi.org/10.32468/be.257 (application/pdf)

Related works:
Working Paper: Capital Destruction, Optimal Defense and Economic Growth (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:bdr:borrec:257

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