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Who gains from non-collusive corruption?

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  • Foellmi, Reto
  • Oechslin, Manuel

Abstract

We explore the impact of non-collusive corruption on the wealth distribution. We show that the distributional consequences depend crucially on the degree of capital market imperfections. With perfect capital markets, corruption does not redistribute wealth within the private sector. However, if borrowing is limited, members of the ''middle class'' suffer most since bribery drives them out of the capital market. This makes access to credit easier for wealthy individuals such that a group of them even wins. Finally, we provide cross-country evidence showing that a high level of corruption and a polarization of the distribution go indeed hand in hand.
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  • Foellmi, Reto & Oechslin, Manuel, 2007. "Who gains from non-collusive corruption?," Journal of Development Economics, Elsevier, vol. 82(1), pages 95-119, January.
  • Handle: RePEc:eee:deveco:v:82:y:2007:i:1:p:95-119
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    More about this item

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

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