Dynamics of Military Expenditure and Income Inequality in Pakistan

Syed Raza, Muhammad Shahbaz and Sudharshan Reddy Paramati

Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, 2017, vol. 131, issue 3, No 8, 1035-1055

Abstract: Abstract This study investigates the impact of military expenditures on income inequality in Pakistan using data over the period of 1972–2012. For this purpose, we applied the ARDL bounds testing cointegration approach which confirmed the presence of long-run equilibrium relationship between military expenditure and income inequality. Furthermore, empirical analysis indicates that military spending has a positive impact on income inequality. The analysis of Granger causality, Toda–Yamamoto Modified Wald test and variance decomposition approaches confirm the presence of unidirectional causality running from military expenditure to income inequality. The findings of our study suggest that higher military expenditure leads to higher income inequality in Pakistan. Therefore, we advise the policy makers to focus more on the policies which can increase the economic activities in the country and eventually reduce income inequality.

Keywords: Military expenditure; Income inequality; Economic growth; Pakistan (search for similar items in EconPapers)
JEL-codes: D30 F43 H56 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (25)

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DOI: 10.1007/s11205-016-1284-7

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