Dynamics of Military Expenditure and Income Inequality in Pakistan

Syed Ali Raza, Muhammad Shahbaz, Sudharshan Reddy Paramati

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    11 Citations (Scopus)

    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.

    Original languageEnglish
    Pages (from-to)1035-1055
    Number of pages21
    JournalSocial Indicators Research
    Volume131
    Issue number3
    Early online date2 Mar 2016
    DOIs
    Publication statusPublished - Apr 2017

    Keywords

    • Economic growth
    • Income inequality
    • Military expenditure
    • Pakistan

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