Who Gains From Non-Collusive Corruption?

Reto Foellmi and Manuel Oechslin ()

No 142, IEW - Working Papers from Institute for Empirical Research in Economics - University of Zurich

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.

Keywords: corruption; income inequality; development (search for similar items in EconPapers)
JEL-codes: D31 D73 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ent, nep-lam and nep-tra
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Citations: View citations in EconPapers (37)

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Related works:
Journal Article: Who gains from non-collusive corruption? (2007)
Working Paper: Who Gains from Non-Collusive Corruption? (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:zur:iewwpx:142

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