Budget Deficits, Defense Expenditure and Income Redistribution: An Application of the ARDL Model

摘要

This paper examines the relationship between defense expenditure and income redistribution in India for the period 1970-2009. The analysis was based on an autoregressive distributed lag model (ARDL) popularized by Pesaran et al. Empirical estimates reveal that military spending in India is indeed associated with income redistribution. The empirical approach indicates that there exists a long-run relationship between transfer payments as a percentage in GDP (TP), Defense expenditures as a percentage in GDP (ME) and budget deficits as a percentage in GDP (DEF) in India. Defense expenditures as a percentage in GDP, the budget deficits as a percentage in GDP have positive and significant impacts on transfer payments in the same fiscal year. But the budget deficit as a percentage in GDP has negative and significant impact on TP in the next fiscal year.