Savunma Harcamaları ve Kurumsal Kalitenin Gelir Eşitsizliğine Etkisi: Türkiye’den Yeni Kanıtlar
The Effect of Defense Spending and Institutional Quality on Income Inequality: Fresh Evidence from Türkiye

Summary/Abstract: Defense spending, which is purported to be a contributing factor to inequality, has received scant attention in the extant literature. Given Türkye's imperative to allocate resources to defense in order to address security concerns arising from its geographical context, and concurrently, the necessity to curtail income inequality within the nation, a comprehensive understanding of the defense spending and inequality nexus is imperative. This study investigates the effects of defence spending, misery index, growth and institutional quality on income inequality in Türkiye for the period 1988-2023. Using the RALS-ADL cointegration method, the long-run relationship was confirmed. The long-run elasticities indicate a U-shaped relationship between growth and inequality. In addition, misery index and defense spending are found to increase inequality and the effect of institutional quality is insignificant. The existence of a U-shaped relationship implies that growth will increase inequality in the long run. This phenomenon is further exacerbated by an increase in defense spending and a high inflation rate. The fact that the level of institutional quality is far from having an equalizing effect also presents a negative scenario for Türkiye. To mitigate these challenges, it is imperative to enhance social protection expenditures for low-income groups, ensure the efficiency of defense spending, and devise macroeconomic policies that do not engender inflationary pressures in markets.

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