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Does Corruption Affect Income Inequality and Poverty?

41 Pages Posted: 15 Feb 2006  

Sanjeev Gupta

International Monetary Fund (IMF) - Fiscal Affairs Department

Hamid R. Davoodi

International Monetary Fund (IMF) - Fiscal Affairs Department

Rosa Alonso-Terme

University of the Philippines, Diliman

Date Written: May 1998

Abstract

This paper demonstrates that high and rising corruption increases income inequality and poverty by reducing economic growth, the progressivity of the tax system, the level and effectiveness of social spending, and the formation of human capital, and by perpetuating an unequal distribution of asset ownership and unequal access to education. These findings hold for countries with different growth experiences, at different stages of development, and using various indices of corruption. An important implication of these results is that policies that reduce corruption will also lower income inequality and poverty.

Keywords: Corruption, income inequality, poverty

JEL Classification: D73, D31, I32

Suggested Citation

Gupta, Sanjeev and Davoodi, Hamid R. and Alonso-Terme, Rosa, Does Corruption Affect Income Inequality and Poverty? (May 1998). IMF Working Paper, Vol. , pp. 1-41, 1998. Available at SSRN: https://ssrn.com/abstract=882360

Sanjeev Gupta (Contact Author)

International Monetary Fund (IMF) - Fiscal Affairs Department ( email )

700 19th Street, NW
Washington, DC 20431
United States

Hamid R. Davoodi

International Monetary Fund (IMF) - Fiscal Affairs Department ( email )

700 19th Street, NW
Washington, DC 20431
United States

Rosa Alonso-Terme

University of the Philippines, Diliman

Asian Center, Romulo Hall
Magsaysay corner Guerrero Sts.
U.P. Diliman, Quezon City, 1100
Philippines

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