Investigating the Relation between Military Expenditures and Income Distribution in Iran (1351-1395)

Considering the Increasing importance of inequality, it is necessary to inspect effective factors on it. Military expenditures as a part of government expenditures can have impacts on inequality through different mechanisms. In this paper we examine the effect of military expenditures on income inequality in Iran. Results show that there is a reversed U nonlinear relation between military expenditures and income inequality. It means by increasing military expenditures, income inequality gets worth at first but as the expenditures continues to increase, the inequality gets better. Results of Granger causality test and VECM model also show that in short and long run there is one way causality relation from military expenditures to inequality which in the case of a shock in the short run, in every period 0.11 of disequilibrium diminishes.