Is there a trade-off between income inequality and corruption? Evidence from Latin America
AbstractConventional economic thinking says corruption and income inequality are positively related. In contrast, this study finds that lower corruption is associated with higher income inequality. The finding of a trade-off is not unexpected in the context of Latin America, for two reasons. First, Latin America has a large informal sector and corruption-reducing polices impose a transaction cost on this sector whose members are among the poorest. Second, redistributive measures, promoted by corrupt elements in society, are often cut back with institutional reform and this serves to worsen inequality. The results imply that corruption-reducing policies aimed at lowering inequality may be misguided.
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Bibliographic InfoPaper provided by Nottingham Trent University, Nottingham Business School, Economics Division in its series Working Papers with number 2009/4.
Date of creation: Jun 2009
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corruption; Latin America; income inequality; instrumental variables; panel data.;
Other versions of this item:
- Dobson, Stephen & Ramlogan-Dobson, Carlyn, 2010. "Is there a trade-off between income inequality and corruption? Evidence from Latin America," Economics Letters, Elsevier, vol. 107(2), pages 102-104, May.
- O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
- O54 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
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