Empirical evidence on the effect of defense spending on US output is at best mixed. Against this backdrop, this paper assesses the impact of a positive defense spending shock on the growth rate of real GNP using a Factor Augmented Vector Autoregressive (FAVAR) model estimated with 116 variables...

We analyze the welfare-maximizing policy mix between explicit and implicit taxation, where the probability of survival of the young agents depends upon the share of government expenditure on health, education and infrastructure. We show that increases in the survival probability lead to an...