The Impact of Reducing Military Expenditures in South Korea Using a CGE Model

Military expenditure is an essential budget item because it is directly related to national security and national competitiveness in the world. Therefore, it is hard to reduce military expenditure. Many scholars have explored the relationship between military expenditure and economic development. Unlike the previous research, this paper does not analyze the relationship between defense expenditures and economic development. Instead, this research explores how various industries are affected by defense expenditures by using a computable general equilibrium (CGE) model. CGE model can help to analyze the impact of reducing military expenditure and can forecast the impact of the investment of reduced military expenditure in other industries by simulations. Simulations seem that reducing military expenditure negatively affects economic development, but this research identifies industries for which increased government expenditures would improve household well-being when defense expenditures are reduced.