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Curbing corruption, financial development and income inequality


  • Sourav Batabyal

    (Department of Finance, Marquette University, Milwaukee, WI, USA)

  • Abdur Chowdhury

    (Department of Economics, Marquette University, Milwaukee, WI, USA)


In recent years, many of the Commonwealth countries have experienced a reduction in income inequalities due to the development of financial markets and intermediaries. At the same time, widespread corruption among public officials, civil servants, or politicians from these countries have been well documented. A key public policy question is whether the return to financial sector development at the level of massive corruption, exacerbate income inequality, offsetting the benefits of financial development. Using a panel data of 30 Commonwealth countries over the period of 1995–2008, it is found that the high rates of corruption in the Commonwealth countries are crowding out the return to financial development. The return to financial development on income inequality, at the level of higher corruption, are positive for all countries and significantly larger for the low- and middle-income countries compared to high-income countries, which suggest that the complementary nature of policies that simultaneously reduce corruption and promote financial development have a greater impact in reducing income inequality than implementing these policies separately.

Suggested Citation

  • Sourav Batabyal & Abdur Chowdhury, 2015. "Curbing corruption, financial development and income inequality," Progress in Development Studies, , vol. 15(1), pages 49-72, January.
  • Handle: RePEc:sae:prodev:v:15:y:2015:i:1:p:49-72

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    2. Tchamyou, Vanessa S. & Erreygers, Guido & Cassimon, Danny, 2019. "Inequality, ICT and financial access in Africa," Technological Forecasting and Social Change, Elsevier, vol. 139(C), pages 169-184.
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    9. Asongu, Simplice A. & Nnanna, Joseph & Acha-Anyi, Paul N., 2020. "Inequality and gender economic inclusion: The moderating role of financial access in Sub-Saharan Africa," Economic Analysis and Policy, Elsevier, vol. 65(C), pages 173-185.
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    13. Tran, Viet T. & Walle, Yabibal M. & Herwartz, Helmut, 2020. "The impact of local financial development on firm growth in Vietnam: Does the level of corruption matter?," European Journal of Political Economy, Elsevier, vol. 62(C).
    14. Mark Edem Kunawotor & Godfred Alufar Bokpin & Charles Barnor, 2020. "Drivers of income inequality in Africa: Does institutional quality matter?," African Development Review, African Development Bank, vol. 32(4), pages 718-729, December.
    15. Andris Zimelis, 2020. "Corruption research: A need for an integrated approach," International Area Studies Review, Center for International Area Studies, Hankuk University of Foreign Studies, vol. 23(3), pages 288-306, September.
    16. Bayar Yilmaz & Sezgin H. Funda, 2017. "Trade Openness, Inequality and Poverty in Latin American Countries," Ekonomika (Economics), Sciendo, vol. 96(1), pages 47-57, January.
    17. Adekoya Adenuga Fabian & Razak Nor Azam Abdul, 2016. "The Link Between Economic Growth, Crime and Deterrence Measures in Nigeria," Studia Universitatis „Vasile Goldis” Arad – Economics Series, Sciendo, vol. 26(4), pages 24-40, November.
    18. Chima M. Menyelim & Abiola A. Babajide & Alexander E. Omankhanlen & Benjamin I. Ehikioya, 2021. "Financial Inclusion, Income Inequality and Sustainable Economic Growth in Sub-Saharan African Countries," Sustainability, MDPI, Open Access Journal, vol. 13(4), pages 1-15, February.
    19. Dwiputri, Inayati Nuraini & Arsyad, Lincolin & Pradiptyo, Rimawan, 2018. "The corruption-income inequality trap: A study of Asian countries," Economics Discussion Papers 2018-81, Kiel Institute for the World Economy (IfW).
    20. Vanessa S. Tchamyou, 2020. "Financial Access, Governance and the Persistence of Inequality in Africa: Mechanisms and Policy instruments," Working Papers 20/027, European Xtramile Centre of African Studies (EXCAS).
    21. Dagim Tadesse Bekele, 2020. "Effect of Macroeconomic, Demographic, and Governance Factors on Income Inequality of Selected sub-Saharan Africa Countries," Journal of Economic Development, Environment and People, Alliance of Central-Eastern European Universities, vol. 9(1), pages 60-70, September.
    22. Yogeeswari Subramaniam & Tajul Ariffin Masron & Mastura A. Wahab & Md Aslam Mia, 2021. "The impact of microfinance on poverty and income inequality in developing countries," Asian-Pacific Economic Literature, Asia Pacific School of Economics and Government, The Australian National University, vol. 35(1), pages 36-48, May.


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