Corruption and Inequality

Income inequality can partly be explained by mean income through the labour productivity, employment and participation rates and it has been tested here that corruption has statistically significant effect on economic (income/expenditure) inequality. Increase in transparency (or reduction of corruption) reduces inequality through reduction of the shares of top 20 percent, while increasing the share of bottom 80 percent of the population. Thus, corruption only favoured the top 20 percent of the population who in one way or other, usually are related to the political power.