Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/339518 
Year of Publication: 
2025
Series/Report no.: 
Working Paper No. 994
Publisher: 
Queen Mary University of London, School of Economics and Finance, London
Abstract: 
This paper investigates the heterogeneous effects of military spending news shocks on household income and wealth inequality for a large, panel of advanced and emerging economies. Confirming prior literature, we find that military spending news shocks lead to persistent increases in aggregate output and Total Factor Productivity. Our primary contribution is documenting contrasting distributional impacts. We find that expansionary military spending is associated with a mitigation of income inequality, as income gains are disproportionately larger at the left tail of the distribution, primarily driven by a rise in labour income and employment in industry. Conversely, the shock is found to increase wealth inequality, particularly in high-income countries, by raising the wealth share of the top decile (P100) via effects on business asset holdings.
Subjects: 
Military spending shocks
income inequality
wealth inequality
VAR models
JEL: 
C32
E44
E52
Document Type: 
Working Paper

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