Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/320103 
Year of Publication: 
2025
Series/Report no.: 
CESifo Working Paper No. 11882
Publisher: 
CESifo GmbH, Munich
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.
Subjects: 
military buildup
government spending
effectiveness
sectors
reallocation
JEL: 
H56
E62
E23
O41
Document Type: 
Working Paper
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