Military Expenditures and Income Inequality: Evidence from a Panel Analysis

Security is an essential need that must be ensured by any sovereign state. Military expenditures for security occupy an essential place in the budget of the states and even in the GDP. According to World Bank (2020a) statistics, average military expenditures of the countries within the government expenditures have continued to decrease since 2006, while as a share of GDP, it decreases almost steadily since 1985. Those decreases can be interpreted as signs of a relatively peaceful world. The decrease in military expenditures implies more resources for other economic sectors and also implies an increase in income equality within a country. Using a panel regression for country-level observations and the Gini index as a proxy for income inequality, this study aims to determine the impact of military expenditures on income inequality in fifty-two countries (including 28 NATO and 36 OECD member countries) over the period 2001-2019. The empirical key findings of the study can be summarized as follows: The military expenditures, consistent with the literature, increase significantly income inequality, and the findings even reveal that this situation is valid in developed countries. Moreover, the findings show that neither being a member of the NATO alliance nor governance effectiveness significantly impact the income inequality.