Military Expenditures and Inequality: Empirical Evidence from Israel

Abstract

The aim of this paper is to examine different shocks to Israel’s business cycle from 1960 to 2007 in terms of the relationship between military expenditures and inequality, Gini coefficient. We begin with the assumption that there is a direct effect of higher military expenditures on income inequality levels in Israel. To capture this, we use the structural vector autoregressive (SVAR) model to conduct this kind of different shock analysis and find that military expenditures shock (a rise) has a statistically significant effect on the Gini coefficient index after the first 3 years. This finding implies that military expenditures policies lead to inequality (Gini coefficient) in Israel