The Implications of Inequality for Corruption: Does the MENA Region Stand Out?

Vladimir Hlasny

Economia Internazionale / International Economics, 2023, vol. 76, issue 1, 1-40

Abstract: If political connectedness and ability to get ahead through corruption are latent dimensions of multidimensional inequality, then corruption could be the missing piece in the Arab inequality puzzle. A positive link between inequality and corruption is found across a large number of developed countries, but not in the MENA or other emerging, resource-reliant countries. An increase in inequality has the expected detrimental effect on corruption in OECD countries, particularly those with state-led non-liberal markets, whereas the relationship is weak or negative in liberal-market economies. Concentration of economic power appears to translate into political power in coordinated and networked societies while the link vanishes in societies where most transactions are done at arm’s length. Inequality affects corruption negatively in emerging and resource-extracting economies, and notably the MENA. MENA thus exhibits the trends seen among less developed economies, an indication of a variety of the Dutch disease. One explanation could be that successful development and building of institutions initially raise inequality as growth is spread unevenly throughout society. The inequality–corruption link starts out negative and finishes positive across successive stages of development. Hence, beside improving laws and punishing corrupt policymakers, countries should manage economic distribution both out of concern for social justice and to lay down conditions for healthy political and economic contestation. Le conseguenze della disuguaglianza per la corruzione: la regione MENA si distingue? Se la connivenza politica e l’abilità nel fare progressi tramite la corruzione sono dimensioni latenti di una disuguaglianza multidimensionale, allora la corruzione potrebbe essere il tassello mancante nel puzzle della disuguaglianza araba. Una relazione positiva tra disuguaglianza e corruzione è presente in molti paesi sviluppati, non nell'area MENA. Un aumento delle disuguaglianze genera un deleterio effetto sulla corruzione nei paesi OCSE con mercato controllato. La relazione è debole o negativa nelle economie a libero mercato. La concentrazione del potere economico sembra tradursi in potere politico nelle economie relazionali mentre il legame scompare nelle società dove la maggior parte delle transazioni avviene a distanza. La disuguaglianza influisce negativamente sulla corruzione, poiché la crescita si diffonde in maniera ineguale. Oltre a migliorare le leggi e punire i corrotti i paesi dovrebbero gestire la distribuzione delle risorse.

Keywords: Corruption; Inequality; Institutional Trap; MENA; Arab Variety of Capitalism (search for similar items in EconPapers)
JEL-codes: D73 N35 P52 (search for similar items in EconPapers)
Date: 2023
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Working Paper: The Implications of Inequality for Corruption: Does the MENA Region Stand Out? (2020)
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