Defense and Inequality: Evidence from Selected ASIAN Countries

This paper examines the causality between military expenditure and income inequality in selected Asian countries namely Malaysia, Indonesia, Singapore, Philippines, India and South Korea for the period 1970-2005. Autoregressive Distributed Lag (ARDL) bounds testing procedure is employed to (1) analyze the impact of military expenditure on income inequality and (2) the impact of income inequality on military expenditure as well. Interestingly our results indicate one way causality running from military expenditure to income inequality only for the case of Malaysia and bidirectional causality for the case of Singapore. As for the remaining countries, no meaningful relationship could be detected and it can be seen as sign of good governance in these countries.