The Impact of Defence Spending on Income Inequality in Selected Asian Countries: A Comparative Analysis
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Universiti Malaysia Sarawak (UNIMAS)
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Over several decades of shaping defence policy and raising military spending, Asian countries are increasingly becoming concerned with the social and economic implication of their military expenditures. This study looks into the impact of defence spending on income inequality in five selected Asian countries: Malaysia, Japan, Iran, Sri Lanka, and Singapore. This study aims to explore the long-term effect and causality between defence spending and income inequality by studying GDP growth rate, size of the armed forces, and GDP per capita as well. Therefore, this research uses dataset panels from 1980 until 2022 and makes use of Levin, Lin & Chu’s (2002), Im, Pesaran & Shin’s (2003), and Dumitrescu-Hurlin’s (2005) tests. The results reveal that defence spending, GDP growth, and the size of armed forces significantly influence income inequality in the long run. At the same time, GDP per capita was discovered not to be significant. It was also seen that income inequality has strong bidirectional causality to both GDP growth and GDP per capita, while unidirectional causality was found from income inequality to defence spending. This findings points out to policymakers that using wise fiscal strategies and promoting inclusive growth are very important. The study concludes by suggesting that the authorities address inequality with the right defence budget, fair sharing of wealth, and updates to laws to both even out inequality and keep the country secure.