Document Type

Article

Language

eng

Format of Original

24 p.

Publication Date

1-2015

Publisher

SAGE Publications

Source Publication

Progress in Development Studies

Source ISSN

1464-9934

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.

Comments

Accepted version. Progress in Development Studies, Vol. 15, No. 1 (January 2015): 49-72. DOI. © 2015 SAGE Publications. Used with permission.

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