Curbing corruption, financial development and income inequality

Abstract

In recent years, many of the Commonwealth countries have experienced a reduction in income inequalities due to the development of financial markets and intermediaries. at the same time, widespread corruption among public officials, civil servants, or politicians from these countries have been well documented. a key public policy question is whether the return to financial sector development at the level of massive corruption, exacerbate income inequality, offsetting the benefits of financial development. Using a panel data of 30 Commonwealth countries over the period of 1995-2008, it is found that the high rates of corruption in the Commonwealth countries are crowding out the return to financial development. The return to financial development on income inequality, at the level of higher corruption, are positive for all countries and significantly larger for the low-and middle-income countries compared to high-income countries, which suggest that the complementary nature of policies that simultaneously reduce corruption and promote financial development have a greater impact in reducing income inequality than implementing these policies separately.

Financial Access and Productivity Dynamics in Sub-Saharan Africa

“…First, the intensive margin theory maintains that output is promoted by financial access through both direct and indirect mechanisms in order to reward businesses that are already engaged with formal banking services (Chipote, Mgxekwa & Godza, 2014). Second, from the framework of the extensive margin theory, enhancing financial access goes beyond benefiting existing users of formal financial services to equally rewarding previously excluded fractions of the population (Holtz-Eakin, Joulfaian & Rosen, 1994;Batabyal & Chowdhury, 2015;Evans & Jovanovic, 1989;Black & Lynch, 1996;Bae, Han & Sohn, 2012;Odhiambo, 2014;Chiwira, Bakwena, Mupimpila & Tlhalefang, 2016;Orji, Aguegboh & Anthony-Orji, 2015). Put in other terms, the framework of the extensive margin theory maintains that access to finance could also be benefitical to households and business segments that were not previously involved in formal banking operations.…”

Who protests? An exploration of the class dimensions of anticorruption mobilization

“…Corruption indices often exhibit a strong correlation with macro‐level inequality measures such as Gini‐coefficient. Countries with lower levels of inequality tend to have lower levels of corruption (Batabyal & Chowdhury, ; Gupta, Davoodi, & Alonso‐Terme, ). Because the transition of more people from poverty into the middle class represents a reduction in inequality, this might support the argument that the middle class is the driver of mobilization against corruption.…”

Trade Openness, Inequality and Poverty in Latin American Countries

“…Some empirical studies (Beck et. al., 2007;Shahbaz and Islam, 2011) revealed that financial development had affected income inequality negatively, while some recent studies (Batabyal and Chowdhury, 2015;Denk and Cournède, 2015) have found that financial development affected income inequality positively. Furthermore, some studies suggested that the finance-inequality relationship follows a U or an inverted U curve (Greenwood and Jovanovic, 1990).…”