Corruption and inequality of wealth amongst
the very rich
Philip Hans Franses
Bert de Groot
Published online: 21 April 2015
Ó The Author(s) 2015. This article is published with open access at Springerlink.com
Abstract Corruption may lead to tax evasion and unbalanced favors and this may lead to
extraordinary wealth amongst a few. We study for 13 countries 6 years of Forbes rankings
data and we examine whether corruption leads to more inequality amongst the wealthiest.
When we correct in our panel model for current and one-year lagged competitiveness and
GDP growth rates, we ﬁnd no such effect. In fact, we ﬁnd that more competitiveness
decreases inequality amongst the wealthiest.
Keywords Corruption Á Inequality Á Wealth
JEL Classiﬁcation D73 Á D31
1 Introduction and motivation
Corruption is an important topic to study as it has been shown to affect economic growth
and inequality amongst individuals, see Shleifer and Vishny (1993) and Mauro (1995,
2004) and Husted (1999) for classic general studies and Ravallion and Chen (1997), Mo
(2001), Jain (2001), Wilhelm (2002), Gyimah-Brempong (2002) and Gupta et al. (2002)
for more speciﬁc accounts. A general ﬁnding is that higher levels of corruption lead to
more inequality and more poverty, meaning lower incomes at the lower end. In the present
paper we aim to add to the knowledge base by looking only at the wealth levels at the top
end and we examine if inequality amongst the wealthiest is associated with corruption.
Income differences at the top end can be rather large, and they are worthwhile to study.
Some companies give enormous bonuses to their board members, while others follow more
restrictive guidelines. Some managers allot large amounts of stocks and options to
themselves. One could argue that a business community in a country should strive for some
& Philip Hans Franses
Erasmus School of Economics, Econometric Institute, Burgemeester Oudlaan 50,
3062 PA Rotterdam, The Netherlands
Qual Quant (2016) 50:1245–1252