ERF 26th Annual Conference
The Implications of Inequality for Corruption: Does the MENA Region Stand Out?
No.
ERF26_280
Publisher
ERF
Date
August, 2020
Topic
P5. Comparative Economic Systems
N3. Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy
D7. Analysis of Collective Decision-Making
This study is motivated by an assertion that the more unequal a society is, the higher the experienced level of corruption. If political connectedness and ability to get ahead through corruption are latent dimensions of multidimensional inequality, then corruption could be the missing piece in the Arab inequality puzzle. In fact, the positive inequality–corruption link holds in a number of developed countries, but not in the MENA or other emerging and resource-reliant countries. This result is confirmed using graphical and statistical analysis, and using analysis of inequality and corruption in levels as well as in changes. An increase in inequality has the expected detrimental effect on corruption in developed OECD countries, particularly those following state-led non-liberal market traditions. The relationship is the weakest or negative in countries belonging to the liberal market model. Economic power appears to directly translate into political power in networked societies while the link between the two spheres is less direct in societies where most transactions are done at arm’s length. Inequality affects corruption negatively in emerging and resource extracting economies, as well as notably the MENA region. Instead of following the trends among the comparative upper-middle income countries, MENA economies exhibit the trends seen among less developed countries, a possible hint of a variety of the Dutch disease. There does not appear to be an inequality–pilferage trap across developing countries. Successful development and building of institutions initially tend to raise inequality as growth is spread unevenly throughout the society. The inequality–corruption link starts out negative and finishes positive across successive stages of development. The policy implications are that, beside improving laws and punishing corrupt policymakers directly, it is necessary to manage economic distribution, not just out of concern for social justice but also to lay down conditions for healthy political and economic contestation.
Authors
Vladimir Hlasny
Economic Affairs Officer, UN Economic and Social...