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Is there a trade-off between income inequality and corruption? Evidence from Latin America

  • Stephen Dobson
  • Carlyn Ramlogan

Conventional 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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Paper provided by Nottingham Trent University, Nottingham Business School, Economics Division in its series Working Papers with number 2009/4.

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Date of creation: Jun 2009
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Handle: RePEc:nbs:wpaper:2009/4
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  1. Alberto Alesina & George-Marios Angeletos, 2005. "Corruption, Inequality and Fairness," NBER Working Papers 11399, National Bureau of Economic Research, Inc.
  2. Bourguignon, F. & Morrisson, C., 1995. "Inequality and Development: The Role of Dualism," DELTA Working Papers 95-32, DELTA (Ecole normale supérieure).
  3. Barro, Robert J, 2000. "Inequality and Growth in a Panel of Countries," Journal of Economic Growth, Springer, vol. 5(1), pages 5-32, March.
  4. Kwabena Gyimah-Brempong & Samaria de Gyimah-Brempong, 2006. "Corruption, Growth, and Income Distribution: Are there Regional Differences?," Economics of Governance, Springer, vol. 7(3), pages 245-269, August.
  5. Albanesi, Stefania, 2002. "Inflation and Inequality," CEPR Discussion Papers 3470, C.E.P.R. Discussion Papers.
  6. Mattias Lundberg & Lyn Squire, 2003. "The simultaneous evolution of growth and inequality," Economic Journal, Royal Economic Society, vol. 113(487), pages 326-344, 04.
  7. Sanjeev Gupta & Hamid Davoodi & Rosa Alonso-Terme, 2002. "Does corruption affect income inequality and poverty?," Economics of Governance, Springer, vol. 3(1), pages 23-45, 03.
  8. Kwabena Gyimah-Brempong, 2002. "Corruption, economic growth, and income inequality in Africa," Economics of Governance, Springer, vol. 3(3), pages 183-209, November.
  9. Morley, Samuel A., 2000. "The effects of growth and economic reform on income distribution in Latin America," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), August.
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