The role of defense, health, and education expenditures in emerging economies (E7) on income distribution: A panel data analysis

Public expenditures play a strategic role in economic growth, social welfare, and income distribution. A review of the literature reveals no full consensus on the effects of different types of public expenditures (health, education, defense) on income distribution. This study aims to examine the impact of health, education, and defense expenditures on income distribution using annual data from 2000–2022 for the E7 emerging economies: Brazil, China, Indonesia, India, Mexico, Russia, and Turkey. The study employs a panel data analysis method, using the Gini coefficient to represent income inequality as the dependent variable, and the shares of health, education, and defense expenditures in Gross Domestic Product (GDP) as independent variables. The analysis results indicate a negative and statistically significant relationship between health expenditures and income inequality. This finding suggests that a one-unit increase in health expenditures leads to an approximate 0.936-unit decrease in the Gini coefficient. Conversely, a positive and significant relationship was found between education expenditures and income inequality, with a one-unit increase observed to raise income inequality by 0.635 units. Defense expenditures did not show a statistically significant effect on income inequality. These findings reveal that the effects of public expenditures on income distribution in E7 countries can vary depending on the type of expenditure, highlighting the potential of health expenditures to reduce income inequality.