Linkages between defense spending and income inequality in Iran

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

Research output: Contribution to journalArticle

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.

Original languageEnglish (US)
Pages (from-to)1317-1332
Number of pages16
JournalQuality and Quantity
Volume50
Issue number3
DOIs
StatePublished - May 1 2016

Keywords

  • Defense spending
  • Income inequality
  • Iran

ASJC Scopus subject areas

  • Statistics and Probability
  • Social Sciences(all)

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    Shahbaz, M., Sherafatian-Jahromi, R., Malik, M. N., Shabbir, M. S., & Jam, F. A. (2016). Linkages between defense spending and income inequality in Iran. Quality and Quantity, 50(3), 1317-1332. https://doi.org/10.1007/s11135-015-0207-z