Corruption, Shadow Economy and Income Inequality: Evidence from Asia

31 Pages Posted: 12 Jan 2013

See all articles by Saibal Kar

Saibal Kar

Centre for Studies in Social Sciences, Calcutta; Institute of Labor Economics (IZA)

Shrabani Saha

School of Finance and Business Economics; Financial Research Network (FIRN)

Abstract

A number of recent studies for Latin America show that as the size of the informal economy grows, corruption is less harmful to inequality. We investigate if this relationship is equally compelling for developing countries in Asia where corruption, inequality and shadow economies are considerably large. We use Panel Least Square and Fixed Effects Models for Asia to find that both 'Corruption Perception Index' and 'ICRG' index are sensitive to a number of important macroeconomic variables. We find that in the absence of the shadow economy, corruption increases inequality. However, with larger shadow economies in South Asia, the income inequality tends to fall.

Keywords: corruption, inequality, shadow economy, panel data, South Asia

JEL Classification: J48, K42, O17, O53

Suggested Citation

Kar, Saibal and Saha, Shrabani, Corruption, Shadow Economy and Income Inequality: Evidence from Asia. IZA Discussion Paper No. 7106. Available at SSRN: https://ssrn.com/abstract=2199789

Saibal Kar (Contact Author)

Centre for Studies in Social Sciences, Calcutta ( email )

R-1, Baishnabghata Patuli Township
Calcutta, 700 094
India
91-33-2462 7252 (Phone)
91-33-2462 6183 (Fax)

HOME PAGE: http://www.cssscal.org

Institute of Labor Economics (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Shrabani Saha

School of Finance and Business Economics ( email )

100 Joondalup Drive
Joondalup, WA 6027
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Register to save articles to
your library

Register

Paper statistics

Downloads
137
Abstract Views
608
rank
207,740
PlumX Metrics