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Corruption, Income Distribution, and Growth

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  • Hongyi Li
  • Lixin Colin Xu
  • Heng‐fu Zou

Abstract

This paper uses an encompassing framework developed by Murphy et al. (1991, 1993) to study corruption and how it affects income distribution and growth. We find that (1) corruption affects income distribution in an inverted U‐shaped way, (2) corruption alone also explains a large proportion of the Gini differential across developing and industrial countries, and (3) after correcting for measurement errors, corruption seems to retard economic growth. But the effect is far less pronounced than the one found in Mauro (1995). Moreover, corruption alone explains little of the continental growth differentials. In countries where the asset distribution is less equal, corruption is associated with a smaller increase in income inequality and a larger drop in growth rates.

Suggested Citation

  • Hongyi Li & Lixin Colin Xu & Heng‐fu Zou, 2000. "Corruption, Income Distribution, and Growth," Economics and Politics, Wiley Blackwell, vol. 12(2), pages 155-182, July.
  • Handle: RePEc:bla:ecopol:v:12:y:2000:i:2:p:155-182
    DOI: 10.1111/1468-0343.00073
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    1. Oates, Wallace E., 1993. "Fiscal Decentralization and Economic Development," National Tax Journal, National Tax Association, vol. 46(2), pages 237-43, June.
    2. Oates, Wallace E., 1993. "Fiscal Decentralization and Economic Development," National Tax Journal, National Tax Association;National Tax Journal, vol. 46(2), pages 237-243, June.
    3. Bird, Richard & Wallich, Christine, 1993. "Fiscal decentralization and intergovernmental relations in transition economics : toward a systematic framework of analysis," Policy Research Working Paper Series 1122, The World Bank.
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    More about this item

    JEL classification:

    • D3 - Microeconomics - - Distribution
    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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