Corruption control,shadow economy and income inequality: Evidence from Asia

Developing countries often suffer from high corruption, high income inequality and poor institutional arrangements that give rise to large shadow economies. Earlier evidence shows that shadow economies moderate the negative effects of corruption on income inequality in highly unequal South American countries. For Asia, we show that the persistence of shadow economies raises inequality even if corruption control is strong. Supported by static and dynamic panel data analyses of 21 countries in Asia between 1995 and 2015, we show that in order to combat rising inequality, corruption control must be complemented by the ability to translate secondary and tertiary school enrolment into industrial and, more importantly, service sector jobs. Countries with low corruption but high inequality can reduce inequality by committing to higher public consumption expenditures. Further, combining greater trade openness with low corruption lowers inequality, except for countries in South Asia.     

Does corruption affect income inequality and poverty?

This paper provides evidence that high and rising corruption increases income inequality and poverty. An increase of one standard deviation in corruption increases the Gini coefficient of income inequality by about 11 points and income growth of the poor by about 5 percentage points per year. These findings are robust to use of different instruments for corruption and other sensitivity analyses. The paper discusses several channels through which corruption may affect income inequality and poverty. An important implication of these findings is that policies that reduce corruption will most likely reduce income inequality and poverty as well. Received: March 2, 2000 / Accepted: September 20, 2001     

Corruption, economic growth, and income inequality in Africa

This paper uses panel data from African countries and a dynamic panel estimator to investigate the effects of corruption on economic growth and income distribution. I find that corruption decreases economic growth directly and indirectly through decreased investment in physical capital. A unit increase in corruption reduces the growth rates of GDP and per capita income by between 0.75 and 0.9 percentage points and between 0.39 and 0.41 percentage points per year respectively. The results also indicate that increased corruption is positively correlated with income inequality. The combined effects of decreased income growth and increased inequality suggests that corruption hurts the poor more than the rich in African countries. Received: March 19, 2001 / Accepted: December 14, 2001 RID="*" ID="*" An earlier version of this paper was presented at the first AmFiTan International Conference on Development Ethics in February 2000, Dar er Salaam, Tanzania. I thank two anonymous referees of this Journal for helpful suggestions. I am, however, solely responsible for any remaining errors.     

Global estimates of growth–inequality–poverty (GIP) triangle: evidence from World Bank’s classification countries

This study extended the concept of ‘growth–inequality–poverty (GIP) triangle’ by using the principle component approach which allows us to composite different poverty and inequality indicators into one single index that contains most of the useful information from the original dataset. Using the idea of GIP triangle, this study examines the long-run relationship among weighted poverty index (which comprises headcount ratio, poverty gap and squared poverty gap); weighted inequality index (i.e., Watts Index, Gini Index and MLD Index) and average monthly per capita income in the designated 138 countries according to World Bank’s classification over a period of 2005–2010. The data set mainly contain countries’ unit record household survey at least one which is conducted between the countries during the sample period. The regression model encompassing the impact of economic growth and income inequality on poverty reflects that income inequality increases poverty while economic growth decreases poverty. It indicates that the impact of inequality in increasing poverty is a somewhat greater than that of growth in average income in reducing overall poverty in a sample countries. The other regression model encompassing the impact of economic growth and poverty on income inequality showed that the poverty itself is also likely to be a barrier for poverty reduction; and inequality seems to predict lower future growth rates. The final regression model depicting the impact of poverty and income inequality on mean income of the household suggests that poverty itself reduces mean income of the household while income inequality increases economic growth. The results are interesting and simply suggest that whenever social institutions malfunction, the incidence of damage would usually be distributed unevenly over the society’s members.     

Natural inequality,production and economic growth

This paper explains why the effect of income inequality on productivity and growth is ambiguous. When income distribution exhibits inequality levels that are compatible with accepted criteria, productivity and growth ensue. When the divergence from an acceptable level of inequality occurs, then under certain conditions, we may expect lower (higher) production levels and lower (higher) levels of economic growth.     

Corruption, Growth, and Income Distribution: Are there Regional Differences?

This paper uses panel data from 61 countries at different stages of economic development over a 20-year period to investigate regional differences in the effect of corruption on economic growth and income distribution. Using two measures of corruption, we find that there are statistically significant regional differences in the growth and distributional impacts of corruption. The largest growth impact of corruption is found in African countries while OECD and Asian countries have the lowest growth impact. On the other hand, the largest distributional impact of corruption in found in Latin America. A 10% decrease in corruption increases the growth rate of income by about 1.7% in OECD and Asian countries, 2.6% in Latin American countries, and by 2.8% in African countries. A one standard deviation decrease in corruption decreases the gini coefficient of income distribution (0–1 scale) by 0.05 points, 0.14 points, 0.25 points, and 0.33 points in OECD, Asian, African, and Latin American countries, respectively. The results are robust to various specifications, measurement of corruption, measures of investment, as well as the conditioning variables. The results have interesting policy implications for economic growth, especially in low income countries with high rates of corruption.     

The Effect of Income Distribution on the Ability of Growth to Reduce Poverty: Evidence from Rural and Urban African Economies

The present study examines the extent to which income distribution affects the ability of economic growth to reduce poverty, based on 1990s data for a sample of rural and urban sectors of African economies. Using the basic‐needs approach, an analysis‐of‐covariance model is derived and estimated, with the headcount, gap, and squared gap poverty ratios serving as the respective dependent variables, and the Gini coefficient and PPP‐adjusted incomes as explanatory variables. The study finds that the responsiveness of poverty to income growth is a decreasing function of inequality, albeit at varying rates for the three poverty measures: lowest for the headcount, followed by the gap and fastest for the squared gap. The ranges for the income elasticity in the sample are estimated at: 0.02–0.68, 0.11–1.05, and 0.10–1.35, respectively, for these poverty measures. Furthermore while, on average, the responsiveness of poverty to income growth appears to be the same between the rural and urban sectors, there are substantial sectoral differences across countries. The results suggest the need for country‐specific emphases on growth relative to inequality.     

Financialization and Income Inequality in the United States, 1967–2010

This article presents a historical overview of the late 20^th‐century advent of financialization, that is, the unprecedented growth of the financial sector. We summarize its origins and consequences, particularly greater income inequality. An econometric model quantifies the relationship. We conclude that along with higher unemployment and an eroding minimum wage, the growth of the U.S. financial sector has contributed to the exacerbation of inequality in recent decades.     

Linkages between income inequality,international remittances and economic growth in Pakistan

This paper explores the dynamic linkages between income inequality, international remittances and economic growth using time series data over the period of 1976–2006 in case of Pakistan. The cointegration analysis based on the bounds test confirms the existence of a long-run relationship between income inequality, international remittances and economic growth. Our results reveal that income inequality and international remittances enhance economic growth. The causality analysis based on innovative accounting approach shows bidirectional causal relationship between income inequality and economic growth and same is true for international remittances and income inequality. International remittances are cause of economic growth but not vice versa. Although we find support for Kuznets hypothesis but Pakistan is yet to benefit, in terms of reducing the gaps of income inequality, from the international flow of remittances and economic growth. The paper argues that, from a policy perspective, there is an urgent need for policy makers in Pakistan to reduce the widening gap of income inequality by focusing on income redistribution policies and to go beyond the traditional factors in balancing income inequality.     

DOES THE IMPACT OF INSTITUTIONAL QUALITY ON ECONOMIC GROWTH DEPEND ON INITIAL INCOME LEVEL?

The aim of this paper is to determine the most adequate institutional variables to introduce into a growth model, depending on the income levels of countries. The results show that, for rich countries, the rule of law is fundamental while, for poor countries, it is control of corruption. This has important implications for any agenda of institutional reform in either type of country.     

An Empirical Test of the Institutionalist View on Income InequalityEconomic Growth within the United States

This paper analyzes the relationship between income inequality and economic growth within the United States using state level data. It describes income inequality in the U.S. since 1960, then employs a two-step causal model to test the institutionalist contention that income inequality leads to socio-political instability, which has a negative impact on economic progress. The empirical results offer support for the institutionalist view.     

Income risk, macroeconomic and demographic change, and economic inequality in Japan

Using an OLG model with heterogeneous households, we investigate the relationship among income risk, macroeconomic and demographic changes, and economic inequality between 1980 and 2000 in Japan. By decomposing the primary factors in earnings and consumption inequality into macroeconomic variables and the demographic variable, we find that our model replicates the evolution of economic inequality in Japan. By performing counterfactual simulations, we demonstrate that two factors—changes in time-varying macroeconomic factors and the unexpected decline in the total factor productivity growth rate—played important roles in the increase in earnings and consumption inequality in the 1990s.     

An Empirical Test of the Institutionalist View on Income Inequality

This paper analyzes the relationship between income inequality and economic growth within the United States using state level data. It describes income inequality in the U.S. since 1960, then employs a two‐step causal model to test the institutionalist contention that income inequality leads to socio‐political instability, which has a negative impact on economic progress. The empirical results offer support for the institutionalist view.     

Bridging Africa’s income inequality gap: How relevant is China’s outward FDI to Africa?

This study examines whether: (i) the remarkable inflow of Chinese FDI to Africa matters for bridging the continent’s marked income inequality gap, (ii) Africa’s institutional fabric is effective in propelling Chinese FDI towards the equalisation of incomes in Africa and (iii) there exist relevant thresholds required for the various governance dynamics to cause Chinese FDI to equalise incomes in Africa. Our results, which are based on the dynamic GMM estimator and macrodata for 48 African countries, reveal the following. First, although Chinese FDI contributes to fairer income distribution in Africa, the effect is weak. Second, although Africa’s institutional fabric matters for propelling Chinese FDI towards the equalisation of incomes across the continent, governance mechanisms for ensuring political stability, low corruption, and voice and accountability are critical. Finally, the critical masses required for these three key governance dynamics to cause Chinese FDI and other income inequality-reducing modules to reduce income inequality are 0.8, 0.5 and 0.1, respectively. These critical masses are thresholds at which governance is necessary but no longer sufficient to complement Chinese FDI to mitigate income inequality. Hence, at the attendant thresholds, complementary policies are worthwhile. Policy recommendations are provided in the conclusion.     

EFFECTS OF LABOR REALLOCATION ON PRODUCTIVITY AND INEQUALITY—INSIGHTS FROM STUDIES ON TRANSITION

From a theoretical perspective, the link between the speed and scope of rapid labor reallocation and productivity growth or income inequality is ambiguous. Do reallocations with more flows tend to produce higher productivity growth? Does such a link appear at the expense of higher income inequality? We explore the rich evidence from earlier studies on worker flows in the period of massive and rapid labor reallocation, that is, the economic transition from a centrally planned to a market-oriented economy in CEE. We have collected over 450 estimates of job flows from the literature and used these inputs to estimate the short-run and long-run relationship between labor market flows, labor productivity, and income inequality. We apply the tools typical for a meta-analysis to verify the empirical regularities between labor flows and productivity growth as well as income inequality. Our findings suggest only weak and short-term links with productivity, driven predominantly by business cycles. However, data reveal a strong pattern for income inequality in the short run—more churning during reallocation is associated with a level effect toward increased Gini indices.     

CONVERGENCE AND ECONOMIC PERFORMANCE IN GREECE: EVIDENCE AT REGIONAL AND PREFECTURE LEVEL

The purpose of this paper is to test regional convergence and to investigate interregional disparities in terms of per capita income in Greece. The novelty of our study lies in the use of a disaggregated dataset for an extended time period (1971–2003) at two regional levels (NUTS II & NUTS III). Our results indicate that there is β convergence between prefectures but not among regions, while no evidence of σ convergence is found at both regional levels. Also, the GDP geographic concentration and population density have a negative impact on growth, which outweighs the positive growth effect of population geographic concentration and GDP spatial inequality. Thus, policies aiming at the decentralization of economic activity in Greece might enhance growth and regional equality simultaneously. Finally, we do not find economic dualism across geographic areas; however, rich prefectures seem to converge faster than poor ones.     

北京市居民收入差距发展规律与结构特征的实证研究

本文选取1985—2007年的时间序列数据,对23年间北京市居民的收入差距演变规律进行分析,侧重于城镇居民收入差距、农村居民收入差距、以及城乡居民收入差距三个层次,并在对时间序列数据分析基础上,对收入差距的发展趋势进行判断。研究认为,北京市居民收入差距变化大致经历了三个阶段,即差距较小—差距扩大—差距稳中有降;居民收入差距一直存在,但以1993年为节点,之后出现大幅度上升态势;2003—2007年,居民收入差距整体呈现稳中有降的趋势,但降幅不大。对收入差距内部结构的分析显示,23年间,城镇居民收入差距水平小于农村居民收入差距。     

Exports and cross-national corruption: A disaggregated examination

This paper empirically examines the relation between categories of exports and corruption across countries. Aggregate exports and agricultural exports tend to decrease corruption, while fuel exports increase corruption. The influence of agricultural exports in more pronounced in more corrupt nations, while fuel exports contribute to corruption in least corrupt nations. Manufacturing and ore exports, on the other hand, generally fail to show significant impacts on corruption. Our findings demonstrate that the resource curse is sensitive to prevailing corruption levels, and this finding is novel in the literature. Consistent with the extant literature, corruption decreases with income, and (at some corruption levels) as political freedom increases, and with larger government size. The findings are fairly robust to an alternate corruption measure.     

Re-examining the relationship between economic growth and inequality in the New Member States

The link between income inequality and economic growth has raised many debates in the literature and has generated a large spectrum of results over time. This paper aims at analyzing the relationship between economic growth and income inequality, as well as their macroeconomic and institutional determinants in the New Member States, between 2000 and 2009. In the presence of a set of explicative variables, the economic growth influences the social inequality through a U-shaped relationship. Health, education and gross capital formation generate different direct and indirect effects on income inequality as the per capita GDP growths, while the transition indicators are found to be either common or specific determinants of inequality and growth.     

我国的收入分配发展趋势是否为倒U形

阐述了国内外学者对库兹涅茨"倒U假说"所持的观点和认识。用我国的实际数据对库兹涅茨"倒U假说"进行了检验,认为我国的收入分配基本上不符合倒U形状,不能靠经济增长来解决收入差距的拉大问题;收入现状的改善需要政府政策的支持。