The Military Multiplier

Anastasiia Antonova, Ralph Luetticke, Gernot J. Muller and Gernot Müller

No 11882, CESifo Working Paper Series from CESifo

Abstract: What determines the effectiveness of military buildups? We introduce the concept of the military multiplier: the percentage increase in military equipment an additional dollar buys. It varies with the costs of allocating resources to military production, depending, among other things, on the industrial structure and capital reallocation frictions. We show that the response of military-goods prices to military buildups is a sufficient statistic for the military multiplier and that it has declined over time in the US. Using a calibrated multi-sector business cycle model, we show this decline stems from the economy’s structural shift toward the service sector.

Keywords: military buildup; government spending; effectiveness; sectors; reallocation (search for similar items in EconPapers)
JEL-codes: E23 E62 H56 O41 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_11882

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