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ID:
185488
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| Summary/Abstract |
This paper constructs a theoretical model involving supply-side effect, demand-side effect, and security effect produced by military spending to explore the effects of military spending and foreign military threat on employment. This paper proves that the relationship between defense burden and employment is nonlinear (i.e., reverse U shape.). Hence, we find the defense burden of maximizing employment. In addition, we argue that a rise in foreign military threat will be detrimental to the level of output and in turn lead to a reduction in employment. Finally, we show that an increase in the variance of the foreign military spending shocks will raise the level of output and then lead to an increase in employment.
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| 2 |
ID:
143602
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| Summary/Abstract |
The paper analyzes the effects of military spending on economic growth in a small open stochastic endogenous growth model involving the supply-side and demand-side effects produced by military spending. We show that a rise in the military spending affects economic growth through four channels, including the crowding-out effect, the spin-off effect, the resource mobilization effect, and the portfolio effect. The net effect which depends on these four channels is ambiguous. Hence, we demonstrate that there exists an optimal defense burden that maximizes the economic growth rate.
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