A Wicked War: War and the Wealth Inequality – Public Debt Nexus

Abstract

As war is an eminently political event, the impact of wars on inequality can be seen as an expression of the politics in society. This paper engages with the ongoing literature relating warfare to wealth inequality dynamics in a pre-industrial world. It employs an unbalanced panel of wills in a combined event study and instrument variables research designs to explore the wealth inequality dynamics in Mexico during the Mexican-American War of 1846-1848. The findings suggest that weak public finances and financial crisis led to increasing wealth inequality through military expenditures and national debt. However, the formation of a regressive fiscal-military state and a levelling effect of warfare can coexist. Inequality depends on how war is financed and how destructive to capital and wealth the war is.