Corruption and the ‘Paradox of Redistribution’

Article

Abstract

The existing literature on the determinants of income redistribution has identified a ‘paradox’. Namely, that countries with a high degree of market income inequality redistribute little, which is in disagreement with the median voter theorem. In a first step, this paper outlines several mechanisms that explain why government corruption might be partially responsible for this ‘paradox’. In a second step, different corruption perception indices and an instrumental variable approach are used to provide empirical evidence that indicates a significant negative impact of corruption on redistribution levels for a sample of 148 developing and developed countries. This finding suggests that, next to political and need factors, government corruption explains to some extent the ‘paradox of redistribution’. This is especially true for many developing countries, given that they typically have relatively high degrees of corruption and low levels of redistribution.

Keywords

Redistribution Corruption Income inequality 

JEL Classification

H23 D31 D73 

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Copyright information

© Springer Science+Business Media B.V. 2017

Authors and Affiliations

  1. 1.Office of the Chief Economist for Latin America and the CaribbeanWorld BankWashingtonUSA
  2. 2.School of Economics and FinanceUniversidad EAFITMedellínColombia

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