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Linkages between Defense Spending and Income Inequality in Iran

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  • Shahbaz, Muhammad
  • Sherafatian-Jahromi, Reza
  • Malik, Muhammad Nasir
  • Shabbir, Muhammad Shahbaz
  • Jam, Farooq Ahmed

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.

Suggested Citation

  • Shahbaz, Muhammad & Sherafatian-Jahromi, Reza & Malik, Muhammad Nasir & Shabbir, Muhammad Shahbaz & Jam, Farooq Ahmed, 2015. "Linkages between Defense Spending and Income Inequality in Iran," MPRA Paper 63642, University Library of Munich, Germany, revised 10 Apr 2015.
    • Handle: RePEc:pra:mprapa:63642
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    Cited by:

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    2. 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.
    3. repec:ipg:wpaper:2014-513 is not listed on IDEAS
    4. Raza, Syed Ali & Shahbaz, Muhammad, 2014. "To Battle Income Inequality, Focus on Military Expenditures: Lesson from Pakistan," MPRA Paper 57773, University Library of Munich, Germany.
    5. çenberci, engin, 2018. "Defense Expenditures and Income Inequality: Evidence from Chosen Euro Using Countries," MPRA Paper 97946, University Library of Munich, Germany.

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    More about this item

    Keywords

    Defense Spending; Income Inequality;

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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