Is there a trade-off between income inequality and corruption? Evidence from Latin America

Conventional economic thinking says corruption and income inequality are positively related. In contrast, this study finds that lower corruption is associated with higher income inequality. The finding of a trade-off is not unexpected in the context of Latin America, for two reasons. First, Latin America has a large informal sector and corruption-reducing polices impose a transaction cost on this sector whose members are among the poorest. Second, redistributive measures, promoted by corrupt elements in society, are often cut back with institutional reform and this serves to worsen inequality. The results imply that corruption-reducing policies aimed at lowering inequality may be misguided.corruption, Latin America, income inequality, instrumental variables, panel data.

Is there an openness Kuznets curve? Evidence from Latin America

Numerous studies have examined the relationship between income inequality and trade openness. This paper departs from previous work by considering a possible non-linear relationship between trade openness and inequality. The evidence is consistent with the idea of a Kuznets curve: inequality increases until a critical level of openness is reached after which inequality begins to fall. The finding of a non-linear relationship between trade openness and inequality implies that governments in Latin America should introduce redistribution policies, alongside trade liberalisation measures, so as to ease the adverse effects of trade liberalisation.

Is there club convergence in Latin America?

Previous studies of the income convergence hypothesis for Latin American economies indicate that almost all are not systematically closing their income gap with developed nations. The few studies to consider whether they instead exhibit club convergence—i.e., convergence to a steady-state equilibrium significantly inferior to that of the developed economies—offer little convincing evidence of this either. We argue that this reflects the limitations of their measure of relative income (which includes their sample’s average income) and/or the assumptions underlying the discrete-break unit-root tests they employ. By avoiding these limitations, we obtain evidence of two Latin American convergence clubs

Corruption, privatisation and the distribution of income in Latin America

This paper presents new evidence on income inequality in Latin America over the period 1981-2000. Using a panel data methodology, we find that a reduction in corruption is associated with a rise in inequality. This counterintuitive result can be explained by privatisation. Privatisation removes industries from government influence (and corruption) and worsens income inequality as new owners strive for efficiency and profits. The paper argues that structural reform policies aimed primarily at achieving positive and increasing growth rates do not adequately address the income distribution problem.Corruption, Latin America, Income inequality, Instrumental variables, Panel data, Privatisation.

Savings and the informal sector

© 2020 Informa UK Limited, trading as Taylor & Francis Group. In many countries the informal sector is a vital source of employment and income. But little is known about the impact of this sector on savings, which are crucial in promoting investment and growth. This paper finds an inverse relationship between savings rates and the informal sector when the informal sector is small. Once the informal sector reaches a certain size, further growth in the size of the informal sector boosts savings rates. The non-linear relationship is confirmed in both parametric and semi-parametric estimations. Rather than allowing the informal sector to grow unchecked, policy should focus on removing barriers for successful operation of business in the formal sector

A gravity model of remittance determinants: evidence from Latin America and the Caribbean

A gravity model of remittance determinants: evidence from Latin America and the Caribbean. Regional Studies. This paper constructs a microeconomic model of the motivation for remittances and uses it to explore the macroeconomic determinants. In addition, a new measure of bilateral remittances is used to estimate a gravity model of remittances for 27 Latin American and Caribbean countries and 18 industrialized countries. The results suggest remittances are motivated by a combination of altruism and self-interest, both of which are encapsulated by economic and non-economic variables

A gravity model of remittance determinants: evidence from Latin America and the Caribbean

This paper constructs a microeconomic model of the motivation for remittances and uses it to explore the macroeconomic determinants. In addition, a new measure of bilateral remittances is used to estimate a gravity model of remittances for 27 Latin American and Caribbean countries and 18 industrialised countries. The results suggest remittances are motivated by a combination of altruism and self-interest, both of which are encapsulated by economic and non-economic variables

Is there a trade-off between income inequality and corruption? Evidence from Latin America

In contrast to other research, lower corruption is associated with higher income inequality. This result is consistent with the idea that the corruption-inequality relationship may be different where there is a large informal sector, as in Latin America

Convergence and divergence in Latin America, 1970-1998

This paper examines the process of convergence in Latin America over the period 1970-1998. There has been relatively little work on income convergence among developing countries in general and in Latin America in particular, even though many studies have examined convergence both within and among developed countries. There is little support for the convergence hypothesis over the sample period as a whole - although the beta coefficient is positive, it is insignificant. Convergence is strong in the 1970s but by the 1990s it has disappeared. There is no evidence of a narrowing in the cross-country dispersion of income (sigma convergence) for the sample period as a whole. The results offer little support for the neo-classical growth model - poorer countries have not grown faster than richer ones. There is a strong case for strengthening regional development policy.

Is there a trade-off between income inequality and corruption? Evidence from Latin America

In contrast to other research, lower corruption is associated with higher income inequality. This result is consistent with the idea that the corruption-inequality relationship may be different where there is a large informal sector, as in Latin America.Corruption Latin America Income inequality Informal sector Panel data