The economic returns on defense R&D

The re-election of President Trump has accelerated Europe’s impulse to rearm. In this article we assess the part of that spending that could generate long-term positive spillovers to the civilian domain: defense R&D. We use a quantitative model for 19 countries over 50 years to underline the huge importance of defense R&D expenditure in long-run productivity growth. We estimate the ‘bang for the buck’ at $8.1 - 9.4 per $1 vs. $1.5 - 1.7 for non-defense R&D. The return on defense R&D is much higher as it involves breakthrough technologies: from radar and jet engines to the internet and GPS, it has been a catalyst for transformative change, even if these high returns can sometimes only manifest themselves over many years.