The comparative effect of corruption and Piketty's second fundamental law of capitalism on inequality

Adnan M.S. Fakir; Azraf Uddin Ahmad; K. M.Masnun Hosain; Mostafa Rafid Hossain; Ridhim Sadman Gani

doi:10.1016/j.eap.2017.04.006

The comparative effect of corruption and Piketty's second fundamental law of capitalism on inequality

Adnan M.S. Fakir, Azraf Uddin Ahmad, K. M.Masnun Hosain, Mostafa Rafid Hossain, Ridhim Sadman Gani

Research output: Contribution to journal › Article › peer-review

16 Citations (Scopus)

Abstract

We hypothesize that corruption, viewed as an institutional distortion has comparatively larger effects on inequality than the second fundamental law of capitalism proposed by Thomas Piketty. Reaffirming that corruption affects inequality in a non-linear fashion, we also find evidence that r−g increases inequality in the short run, indicating that pre-existing holders of capital derive greater shares of income. However, the effect of r−g is not as strong as that of corruption and is insignificant in highly unequal countries. This suggests that institutional factors play a more important role than the second fundamental law of capitalism in presence of high inequality.

Original language	English
Pages (from-to)	90-105
Number of pages	16
Journal	Economic Analysis and Policy
Volume	55
DOIs	https://doi.org/10.1016/j.eap.2017.04.006
Publication status	Published - 1 Sept 2017
Externally published	Yes

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abstract = "We hypothesize that corruption, viewed as an institutional distortion has comparatively larger effects on inequality than the second fundamental law of capitalism proposed by Thomas Piketty. Reaffirming that corruption affects inequality in a non-linear fashion, we also find evidence that r−g increases inequality in the short run, indicating that pre-existing holders of capital derive greater shares of income. However, the effect of r−g is not as strong as that of corruption and is insignificant in highly unequal countries. This suggests that institutional factors play a more important role than the second fundamental law of capitalism in presence of high inequality.",

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AU - Hossain, Mostafa Rafid

AU - Gani, Ridhim Sadman

PY - 2017/9/1

Y1 - 2017/9/1

N2 - We hypothesize that corruption, viewed as an institutional distortion has comparatively larger effects on inequality than the second fundamental law of capitalism proposed by Thomas Piketty. Reaffirming that corruption affects inequality in a non-linear fashion, we also find evidence that r−g increases inequality in the short run, indicating that pre-existing holders of capital derive greater shares of income. However, the effect of r−g is not as strong as that of corruption and is insignificant in highly unequal countries. This suggests that institutional factors play a more important role than the second fundamental law of capitalism in presence of high inequality.

AB - We hypothesize that corruption, viewed as an institutional distortion has comparatively larger effects on inequality than the second fundamental law of capitalism proposed by Thomas Piketty. Reaffirming that corruption affects inequality in a non-linear fashion, we also find evidence that r−g increases inequality in the short run, indicating that pre-existing holders of capital derive greater shares of income. However, the effect of r−g is not as strong as that of corruption and is insignificant in highly unequal countries. This suggests that institutional factors play a more important role than the second fundamental law of capitalism in presence of high inequality.

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KW - Gini

KW - Inequality

KW - Piketty

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JO - Economic Analysis and Policy

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The comparative effect of corruption and Piketty's second fundamental law of capitalism on inequality

Abstract

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