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Who Gains From Non-Collusive Corruption?


Foellmi, Reto; Oechslin, Manuel (2003). Who Gains From Non-Collusive Corruption? Working paper series / Institute for Empirical Research in Economics No. 142, University of Zurich.

Abstract

We explore the impact of non-collusive corruption on factor rewards and on the wealth distribution. We show that the distributional consequences depend crucially on the degree of capital market imperfections. With perfect capital markets, corruption does not redistribute wealth within the private sector. However, if borrowing is limited, members of the ''middle class'' suffer most since bribery drives them out of the capital market. This in turn makes access to credit easier for relatively wealthy individuals such that a group of them even wins. So, the interest of the latter in overcoming a corrupt regime may be very limited. In the empirical section, we provide cross-country evidence showing that a high level of corruption and a polarization in the income distribution go indeed hand in hand.

We explore the impact of non-collusive corruption on factor rewards and on the wealth distribution. We show that the distributional consequences depend crucially on the degree of capital market imperfections. With perfect capital markets, corruption does not redistribute wealth within the private sector. However, if borrowing is limited, members of the ''middle class'' suffer most since bribery drives them out of the capital market. This in turn makes access to credit easier for relatively wealthy individuals such that a group of them even wins. So, the interest of the latter in overcoming a corrupt regime may be very limited. In the empirical section, we provide cross-country evidence showing that a high level of corruption and a polarization in the income distribution go indeed hand in hand.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Institute for Empirical Research in Economics (former)
Dewey Decimal Classification:330 Economics
Language:English
Date:January 2003
Deposited On:29 Nov 2011 21:26
Last Modified:05 Apr 2016 15:10
Series Name:Working paper series / Institute for Empirical Research in Economics
ISSN:1424-0459
Official URL:http://www.econ.uzh.ch/wp.html
Permanent URL: https://doi.org/10.5167/uzh-52040

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