Military Spending and Economic Growth: A Post-Keynesian Model

Abstract

One important criticism of models of military spending and growth is that they focus on the direct impact, ignoring critical indirect impacts through, for example, income distribution. This article introduces a post-Keynesian model incorporating military spending that allows workers and capitalists to have different marginal propensities to consume. The model suggests first that civilian spending is more likely to increase the productive capacity of the economy due to higher human capital and, second, that military spending and civilian spending will have different effects on the profit share and the wage share.