Economics of Governance

, Volume 3, Issue 1, pp 23–45 | Cite as

Does corruption affect income inequality and poverty?

  • Sanjeev Gupta
  • Hamid Davoodi
  • Rosa Alonso-Terme
Original Papers

Abstract.

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.

Key words: Corruption, income inequality, poverty 
JEL Classification: D73, D31, I32 

Copyright information

© Springer-Verlag Berlin Heidelberg 2002

Authors and Affiliations

  • Sanjeev Gupta
    • 1
  • Hamid Davoodi
    • 1
  • Rosa Alonso-Terme
    • 2
  1. 1.International Monetary Fund, 700 19th Street North West, Washington, DC, 20431, USA (e-mail: sgupta@imf.org) US
  2. 2.The World Bank, 1818 H Street N.W, Room J4-146, Washington DC, 20433 USA US

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