Corruption, Shadow Economy and Income Inequality: Evidence from Asia
AbstractA number of recent studies for Latin America show that as the size of the informal economy grows, corruption is less harmful to inequality. We investigate if this relationship is equally compelling for developing countries in Asia where corruption, inequality and shadow economies are considerably large. We use Panel Least Square and Fixed Effects Models for Asia to find that both 'Corruption Perception Index' and 'ICRG' index are sensitive to a number of important macroeconomic variables. We find that in the absence of the shadow economy, corruption increases inequality. However, with larger shadow economies in South Asia, the income inequality tends to fall.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7106.
Length: 31 pages
Date of creation: Dec 2012
Date of revision:
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Find related papers by JEL classification:
- J48 - Labor and Demographic Economics - - Particular Labor Markets - - - Particular Labor Markets; Public Policy
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
- O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-02-03 (All new papers)
- NEP-DEV-2013-02-03 (Development)
- NEP-IUE-2013-02-03 (Informal & Underground Economics)
- NEP-PBE-2013-02-03 (Public Economics)
- NEP-POL-2013-02-03 (Positive Political Economics)
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