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Dynamics of Military Expenditure and Income Inequality in Pakistan

Author

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  • Syed Ali Raza

    (IQRA University)

  • Muhammad Shahbaz

    (COMSATS Institute of Information Technology)

  • Sudharshan Reddy Paramati

    (Jiangxi University of Finance and Economics)

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.

Suggested Citation

  • Syed Ali Raza & Muhammad Shahbaz & Sudharshan Reddy Paramati, 2017. "Dynamics of Military Expenditure and Income Inequality in Pakistan," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 131(3), pages 1035-1055, April.
    • Handle: RePEc:spr:soinre:v:131:y:2017:i:3:d:10.1007_s11205-016-1284-7
    DOI: 10.1007/s11205-016-1284-7
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    More about this item

    Keywords

    Military expenditure; Income inequality; Economic growth; Pakistan;
    All these keywords.

    JEL classification:

    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • D30 - Microeconomics - - Distribution - - - General
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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