Technological Progress, Alliance Spillovers and Economic Growth in a Disaggregated Arms Race Model

The paper develops a model of the intertemporal allocation of consumption where the role of national security is in protecting the wealth of a country from an attack by an adversary. The model disaggregates weapon systems into those which reduce the likelihood of an attack and those which reduce the damage from an attack. Examples of the former type of weapons include bombers and ICBM's and of the latter, anti-tactical missiles like the Patriot or an antiballistic missile system such as SDI. It is shown that technological innovation in offensive weapon systems lead to increases in the deployment of these systems but to decreases in the deployment of defensive systems. Whereas the effects of technological innovations in damage-limiting or defensive systems are ambiguous. Alliance behaviour is analyzed within this framework and it is shown that free riding is reduced or eliminated by the introduction of multiple weapon systems