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

Stephen Dobson and Carlyn Ramlogan

NBS Discussion Papers in Economics from Economics, Nottingham Business School, Nottingham Trent University

Abstract: 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.

Keywords: corruption; Latin America; income inequality; instrumental variables; panel data. (search for similar items in EconPapers)
JEL-codes: O15 O54 (search for similar items in EconPapers)
Date: 2009-06
New Economics Papers: this item is included in nep-dev
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http://www.ntu.ac.uk/__data/assets/pdf_file/0024/3 ... ality-corruption.pdf First version, 2009 (application/pdf)

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Journal Article: Is there a trade-off between income inequality and corruption? Evidence from Latin America (2010) Downloads
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