Corruption, Income Distribution, and Growth
Lixin Colin Xu
World Bank - Development Research Group (DECRG)
The Chinese University of Hong Kong
World Bank - Development Research Group (DECRG); Peking University
Economics & Politics, Vol. 12, No. 2, 2000
This paper uses an encompassing framework developed by Murphy et al. (1991, 1993) to study corruption and how it affects income distribution and growth. We find that (1) corruption affects income distribution in an inverted U-shaped way, (2) corruption alone also explains a large proportion of the Gini differential across developing and industrial countries, and (3) after correcting for measurement errors, corruption seems to retard economic growth. But the effect is far less pronounced than the one found in Mauro (1995). Moreover, corruption alone explains little of the continental growth differentials. In countries where the asset distribution is less equal, corruption is associated with a smaller increase in income inequality and a larger drop in growth rates.
JEL Classification: O17Accepted Paper Series
Date posted: September 20, 2000
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