Linkages between Defense Spending and Income Inequality in Iran

Muhammad Shahbaz, Reza Sherafatian-Jahromi, Muhammad Nasir Malik, Muhammad Shahbaz Shabbir and Farooq Ahmed Jam
Authors registered in the RePEc Author Service: Muhammad Shahbaz

MPRA Paper from University Library of Munich, Germany

Abstract: This paper contributes in economic literature by investigating the impact of defense spending on income inequality in case of Iran using time series data over the period of 1971-2011. For this purpose, we have applied the ARDL bounds testing approach to cointegration for long run relationship in the presence of structural breaks arising in the series. The stationarity properties of the variables are tested using structural break unit root tests. The causal relationship between defense spending and income inequality is examined by employing the VECM Granger causality approach. Our findings validate the long run relationship between the series. The results indicate that defense spending improves income distribution in Iran. An inverted-U shaped relationship exists between defense spending and income inequality while economic growth reduces income inequality. The causality analysis reveals that defense spending Granger causes income inequality and feedback effect exists between income inequality and economic growth.

Keywords: Defense Spending; Income Inequality (search for similar items in EconPapers)
JEL-codes: C5 (search for similar items in EconPapers)
Date: 2015-04-05, Revised 2015-04-10
New Economics Papers: this item is included in nep-ara and nep-cwa
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Linkages between Defence Spending and Income Inequality in Iran (2012)
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