Budget allocation, national security, military intelligence, and human capital: a dynamic model

Eyal Pecht, Asher Tishler

Research output: Contribution to journalArticlepeer-review

Abstract

This study develops a dynamic model that integrates military intelligence into the defense capability of the country and the optimal allocation of its government budget. We assert that the effectiveness of the country’s military intelligence is contingent on the quality of its human capital, which, in turn, implies a long-term positive relationship between the government’s various civilian expenditures and its capacity to achieve a cost-effective intelligence and, hence, military capability. This relationship is developed within a multiple-period arms race model between two rivals. Using this model and stylized data for the Israeli–Syrian arms race, we show that an appropriate budget shift from defense to civilian expenditures during the initial periods of the planning horizon will gradually (over a decade, say) increase the quality of human capital in the country and, thus, the effectiveness of its intelligence, which, in turn, will increase the country’s future security and welfare.

Original languageEnglish
Pages (from-to)367-399
Number of pages33
JournalDefence and Peace Economics
Volume28
Issue number3
DOIs
StatePublished - 4 May 2017

Keywords

  • Arms race
  • Budget allocation
  • Human capital
  • Intelligence
  • Knowledge race

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