Corruption, shadow economy and income inequality: evidence from Asia

Kar, Saibal and Saha, Shrabani (2012) Corruption, shadow economy and income inequality: evidence from Asia. Project Report. IZA Forschungsinstitut zur Zukunft der Arbeit Institute for the Study of Labor, Bonn, Germany.

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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.

Additional Information:Discussion Paper No. 7106
Keywords:Corruption Economic aspects
Subjects:L Social studies > L100 Economics
Divisions:Lincoln International Business School
ID Code:13719
Deposited On:02 Apr 2014 17:23

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