Corruption, Shadow Economy and Income Inequality: Evidence from Asia

Saibal Kar () and Shrabani Saha ()
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Shrabani Saha: Edith Cowan University

No 7106, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: A number of recent studies for Latin America show that as the size of the informal economy grows, corruption is less harmful to inequality. We investigate if this relationship is equally compelling for developing countries in Asia where corruption, inequality and shadow economies are considerably large. We use Panel Least Square and Fixed Effects Models for Asia to find that both 'Corruption Perception Index' and 'ICRG' index are sensitive to a number of important macroeconomic variables. We find that in the absence of the shadow economy, corruption increases inequality. However, with larger shadow economies in South Asia, the income inequality tends to fall.

Keywords: South Asia; panel data; shadow economy; inequality; corruption (search for similar items in EconPapers)
JEL-codes: J48 K42 O17 O53 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2012-12
New Economics Papers: this item is included in nep-dev, nep-iue, nep-pbe and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Published - published in: Economic Systems, 2021, 45 (2), 100774

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