EFFECTS OF PUBLIC-SECURITY EXPENDITURES ON ECONOMIC GROWTH: A STOCHASTIC MACROECONOMIC MODEL

Resumen

This paper examines security-related expenditures aimed at combating organized crime and analyzes their effects on economic growth. For this purpose, a stochastic, macroeconomic, general-equilibrium model is used in order to analyze the accrual of resources appropriated for the fight against organized crime, as well as the effects of exogenous shocks from output and the expenditure of output. This model reveals that a change in the level of economic resources spent by organized crime against the state will elicit a reaction by the government, causing an impact on economic growth due to the elasticity of intertemporal substitution of consumption. Lastly, based on the functional relationships established by the theoretical model and empirical evidence given within a vector autoregression (VAR) model, the relationship between security-related budgetary expenditures and economic growth is discussed.