Defense R&D: Effects on Economic Growth and Social Welfare
Angus Chu () and
MPRA Paper from University Library of Munich, Germany
In the US, defense R&D share of GDP has decreased significantly since 1960. To analyze the implications on economic growth and welfare, we develop an R&D-based growth model that features the commonly discussed crowding-out and spillover effects of defense R&D on civilian R&D. The model also captures the important effects of defense technology on (a) national security and (b) aggregate productivity via the spin-off effect resembling consumption public goods and productive public goods respectively. In this framework, economic growth is driven by market-based civilian R&D as in standard R&D growth models and government-financed public goods (i.e. defense R&D) as in Barro (1990). We find that defense R&D has an inverted-U-shape effect on growth, and the growth-maximizing level of defense R&D is increasing in the spillover effect and in the spin-off effect. Also, there is a welfare-maximizing level of defense R&D that is increasing in the security effect of national defense, and there exists a critical degree of this security effect below (above) which the welfare-maximizing level of defense R&D is below (above) the growth-maximizing level.
Keywords: defense R&D; economic growth; public goods; social welfare (search for similar items in EconPapers)
JEL-codes: O41 O38 H56 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ino and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Downloads: (external link)
https://mpra.ub.uni-muenchen.de/16325/1/MPRA_paper_16325.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/18801/1/MPRA_paper_18801.pdf revised version (application/pdf)
Working Paper: On the Growth and Welfare Effects of Defense R&D (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:16325
Access Statistics for this paper
More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Series data maintained by Joachim Winter ().