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Abstract
The debate about the effect of corruption on income distribution suffers from a number of problems. The main issues are the use of perception-based measures of corruption, which implicitly favours one side of the debate, and a too narrow conception of agency involved in corruption. By relying on direct and grained evidence of bribery in 106 industrialised and industrialising states, and by appreciating the role of agency on the part of bribers, this article finds support for an emerging view that the effect of corruption on inequality is conditional. Under poor institutional conditions, entrepreneurial-related bribery is associated with an increase in the relative income share of the poorest 40%, mitigating disposable income inequality. The results are robust to the use of different income-distribution measures and data sources, as well as different specifications. While wide-spread bribery and corruption in general may be detrimental to longer term socio-economic progress, it is important not to ignore the incentives and constraints that lead people to use bribery as a means of survival.
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This article has been republished with minor changes. These changes do not impact the academic content of the article.
Notes
1 See Leff 1964; Leys Citation1965; Bayley Citation1966; Greenstone 1966; Nye Citation1967; Huntington 1968; and Scott Citation1969.
2 The World Bank’s Enterprise Surveys (ES) are also a useful source on corruption experiences, and are available for a range of countries, unfortunately only from the early 2000s, and only for non-OECD states, though.
3 There are actually seven categories of bribes covered by the GCB data. I rearrange the seven into three categories.
4 Dealing effectively with endogeneity is a challenge, given the significant degree of mutual dependence in the data. High income inequality, while shaped by institutional quality (Chong & Gradstein Citation2007a) and corruption, in turn could influence institutional quality and encourage corruption. Inequality contributes to undermining trust in institutions that in turn stimulates more corruption. You and Khagram (Citation2005) point out that income inequality reflects power differentials in a society, providing the wealthy with more motivation and opportunities to benefit from corrupting political decision making, especially if done by competitive elections. Inequality also undermines trust in norms and institutions, encouraging greater tolerance of deviant behaviour, including corruption. Uslaner (Citation2008) also links inequality and corruption by showing how the former decreases general interpersonal trust and increases in-group trust, thus lowering the normative barriers of engagement in corruption. To complicate matters even further, weak institutions provide a fertile context for bribery/corruption to flourish, and the more widespread the latter becomes, the more institutional quality is undermined (Uslaner Citation2008).
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Philip Nel
Philip Nel is a professor in the Department of Politics, University of Otago, New Zealand, and professor extraordinaire at Stellenbosch University, South Africa. He is the author of “The Politics of Economic Inequality in Developing Countries” (Palgrave, 2008). He serves on the editorial boards of Global Society, and The Review of International Studies.