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Who Gains From Non-Collusive Corruption?

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  • Reto Foellmi
  • Manuel Oechslin

Abstract

We explore the impact of non-collusive corruption on factor rewards and 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 in turn makes access to credit easier for relatively wealthy individuals such that a group of them even wins. So, the interest of the latter in overcoming a corrupt regime may be very limited. In the empirical section, we provide cross-country evidence showing that a high level of corruption and a polarization in the income distribution go indeed hand in hand.

Suggested Citation

  • Reto Foellmi & Manuel Oechslin, "undated". "Who Gains From Non-Collusive Corruption?," IEW - Working Papers 142, Institute for Empirical Research in Economics - University of Zurich.
    • Handle: RePEc:zur:iewwpx:142
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    More about this item

    Keywords

    corruption; income inequality; development;
    All these keywords.

    JEL classification:

    • 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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