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Inequality and Economic Development:The Role of Corruption

Author

Listed:
  • Nobuhiro Mizuno

    () (Faculty of Commerce and Economics, Chiba University of Commerce)

  • Katsuyuki Naito

    () (Graduate School of Economics, Kyoto University)

  • Ryosuke Okazawa

    () (Osaka School of International Public Policy, Osaka University)

Abstract

This paper presents a model where income inequality negatively affects economic growth through corruption by politicians. While politicians pursue corruption rents that reduce the provision of public goods and sacrifice citizen's welfare, they are also concerned about the political support of citizens to maintain their political power. When inequality among citizens is large, political support is less sensitive to corruption. Therefore, large inequality increases corruption and impedes economic growth. Since corruption is more prevalent in poor countries than rich ones, our argument is consistent with the evidence that shows a negative relationship between inequality and growth in poor countries.

Suggested Citation

  • Nobuhiro Mizuno & Katsuyuki Naito & Ryosuke Okazawa, 2010. "Inequality and Economic Development:The Role of Corruption," KIER Working Papers 713, Kyoto University, Institute of Economic Research.
  • Handle: RePEc:kyo:wpaper:713
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    File URL: http://www.kier.kyoto-u.ac.jp/DP/DP713.pdf
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    More about this item

    Keywords

    Corruption; Income Inequality; Economic Growth;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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