The Effect of Corruption on Income Inequality: Adynamic Panel Data Analysis for Latin America
DOI:
https://doi.org/10.25097/rep.n42.2025.01Keywords:
corruption, corruption perceptions index, Gini, inequality, dynamic panel dataAbstract
The prevailing perspective holds that corruption has direct effects on income inequality; however, recent research has questioned this relationship. This study analyzes the relationship between corruption measured by the Corruption Perceptions Index and income inequality represented by the Gini Index in 18 Latin American countries between 1996 and 2022. Through a dynamic panel data model, new evidence was provided on a unidirectional causal relationship between corruption and inequality, consistent with previous studies. In this regard, corruption weakens tax systems, distorts public spending, and reduces resources for essential services, which, in turn, increases income inequality. To strengthen the analysis, control variables such as Rule of Law, Foreign Direct Investment, Natural Resource Rents, Primary Education Index, Unemployment, and Real GDP per capita were included as control variables.
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