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Corruption And Income Inequality: Regression Analysis

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2.3 The effects of corruption on growth and inequality.
In Easterly, (2001: 13-14) both Ravallion and Chen found that the number of people below the poverty line of $1 per day was reduced in nations with positive economic growth. However, they concluded that "measures of inequality show no tendency to get either better or worse with economic growth."
Eric C, Frances. C and B. Spector (2003) show in their study that income increases with economic growth and vice versa. However, economic growth does not necessarily mean and lead to income equality; the rich and better-off people tend to benefit more from an increase in income rather than reducing poverty. Income distribution is an important moderating tool in addressing the relationship between economic growth and poverty elevation.
Zak and Knack (1998) argued that there is high trust in countries with stronger formal institutions for streamlining contracts processes and limiting corruption, they also showed that strong formal institutions can influence growth rates For instance income inequality and corruption are linked with lower growth rates. Knack and Keefer (1997) used trust measure to investment and growth, and found that trust is highly associated with economic growth …show more content…

(1998) in his study conducted on cross-national regression analysis for 56 countries to examine how corruption could negatively affect income distribution and poverty, he found that income inequality is harmful to growth, and corruption increases income inequality, reduces growth and thus widen poverty. Corruption exacerbate poverty through increasing inequality since lower income households are forced to pay high bribes to have basic services. He concluded that corruption destroy economic growth, increase income inequality and increase poverty. Similarly, a study on the effect of corruption on economic growth revealed that corruption has a negative effect on growth especially in developing countries (Ugur and Dasgupta

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