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The corruption-income inequality trap: A study of Asian countries

Author

Listed:
  • Dwiputri, Inayati Nuraini
  • Arsyad, Lincolin
  • Pradiptyo, Rimawan
Abstract
The existence of ambiguity in the study of the impact of corruption on economic growth, namely the grease the wheel hypothesis and sand the wheel hypothesis, trigger this research to look at the impact of corruption through another perspective, i.e. income inequality. This study identifies the mutual influence between corruption and income inequality in Asian countries, because in general, Asian countries have high levels of corruption and poor governance. This research attempts to contribute literature on the theoretical modeling of the effect of corruption on income inequality, using the Ramsey Growth model's development. Using the Ordinary Least Square (OLS), Tobit, and Two Stage Least Square (2SLS) methods, this study also proves that a reciprocal influence exists between corruption and income inequality in Asia, otherwise known as the corruption-inequality trap. The results show that the higher the level of corruption is, this can aggravate income inequality, and the higher the income inequality level is, this can affect the level of corruption in Asian countries. Other variables that have a robust effect on income inequality in Asia are per capita income, the gross enrollment rate in primary education, population growth, foreign direct investment, and governance.

Suggested Citation

  • Dwiputri, Inayati Nuraini & Arsyad, Lincolin & Pradiptyo, Rimawan, 2018. "The corruption-income inequality trap: A study of Asian countries," Economics Discussion Papers 2018-81, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwedp:201881
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    References listed on IDEAS

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    3. Kong, Gaowen & Huang, Jiating & Ma, Guangyuan, 2023. "Anti-corruption and within-firm pay gap: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).

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    More about this item

    Keywords

    economic growth; income inequality; corruption; grease the wheel hypothesis; sand the wheel hypothesis;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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