LARROSA Juan Manuel Ceferino
Arms Build-Up and Arms Race in Optimal Economic Growth
JUAN M.C. LARROSA
International Journal of Economic Theory
John Wiley & Sons
Lugar: London; Año: 2016 vol. 12 p. 167 - 167
I analyze a model of strategic interdependence between two economies linked by investments in defensive capital for deterrence purposes. I adapt a two-agent dynamic setting where weapon production affects consumption. Individually both economies determine its balanced growth path by taking into account this interdependence in different grades of awareness. I associate two types of equilibria with internal or external determinants for defense production analogous to scenarios of arms build-up or arms race. I find that a defense sector is compatible with economic growth but tight arms race can harm growth.