Corruption and Income Inequality in China

Kenneth Chan, Vinh Q.T. Dang and Tingting Li

Emerging Markets Finance and Trade, 2020, vol. 56, issue 14, 3351-3366

Abstract: We investigate the intricate relation between corruption and income inequality in China based on provincial panel data of 1996–2014. Our analysis shows that lower corruption is associated with higher income inequality. This seemingly counter-intuitive result, however, is consistent with findings from countries with a large informal sector, particularly those in Latin America. Institutional reform reduces corruption but also imposes additional costs on the participants in the informal sector. The latter effect, at least initially, exacerbates inequality, giving rise to the negative correlation. After the informal sector in China is considered, that negative relation vanishes. Moreover, when reform is accompanied by measures protecting the poor (such as those taken in the agricultural reform occurring in early 2000s), its perverse impact on inequality is significantly reduced. Lastly, public investment is positively associated with income inequality as the former, generally financed by taxation, may transfer income from the taxpayers to the business elites.

Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://hdl.handle.net/10.1080/1540496X.2019.1675632 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mes:emfitr:v:56:y:2020:i:14:p:3351-3366

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/MREE20

DOI: 10.1080/1540496X.2019.1675632

Access Statistics for this article

More articles in Emerging Markets Finance and Trade from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().