Advertisement

Public Choice

, Volume 145, Issue 1–2, pp 125–135 | Cite as

The relationship between corruption and income inequality in U.S. states: evidence from a panel cointegration and error correction model

  • Nicholas Apergis
  • Oguzhan C. DincerEmail author
  • James E. Payne
Article

Abstract

We investigate the causality between corruption and income inequality within a multivariate framework using a panel data set of all 50 U.S. states over the period 1980 to 2004. The heterogeneous panel cointegration test by Pedroni (Oxf. Bull. Econ. Stat. 61:653–670, 1999; Econom. Theory 20:597–627, 2004) indicates that in the long run corruption and the unemployment rate have a positive and statistically significant impact on income inequality while a negative impact is found for real personal income per capita, education, and unionization rate. The Granger-causality results associated with a panel vector error correction model indicate both short-run and long-run bidirectional causality between corruption and income inequality.

Corruption Income inequality Panel unit root and cointegration tests Granger-causality 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Breitung, J. (2000). The local power of some unit root tests for panel data. Advances in Econometrics, 15, 161–177. CrossRefGoogle Scholar
  2. Carrioni-Silvestre, J. L., del Barrio-Castro, T., & Lopez-Bazo, E. (2005). Breaking the panels: An application to GDP per capita. Econometrics Journal, 8, 159–175. CrossRefGoogle Scholar
  3. Choi, I. (2001). Unit root tests for panel data. Journal of International Money and Finance, 20, 249–272. CrossRefGoogle Scholar
  4. Chong, A., & Calderon, C. (2000). Institutional quality and income distribution. Economic Development and Cultural Change, 48, 761–786. CrossRefGoogle Scholar
  5. Chong, A., & Gradstein, M. (2007). Inequality and institutions. Review of Economics and Statistics, 89, 454–465. CrossRefGoogle Scholar
  6. Dincer, O. C. (2008). Ethnic and religious diversity and corruption. Economics Letters, 99, 98–102. CrossRefGoogle Scholar
  7. Dincer, O. C., & Gunalp, B. (2008). Corruption, income inequality and poverty in the United States. FEEM Working Paper 54. Google Scholar
  8. Engle, R. F., & Granger, C. W. J. (1987). Cointegration and error correction: Representation, estimation, and testing. Econometrica, 55, 251–276. CrossRefGoogle Scholar
  9. Fisman, R., & Gatti, R. (2002). Decentralization and corruption: Evidence from U.S. federal transfer programs. Public Choice, 113, 25–35. CrossRefGoogle Scholar
  10. Fredriksson, P. G., List, J. A., & Millimet, D. L. (2003). Bureaucratic corruption, environmental policy and inbound US FDI: Theory and evidence. Journal of Public Economics, 87, 1407–1430. CrossRefGoogle Scholar
  11. Glaeser, E. L. (2005). Inequality. HIER Discussion Paper 2078. Google Scholar
  12. Glaeser, E. L., & Saks, R. E. (2006). Corruption in America. Journal of Public Economics, 90, 1053–1072. CrossRefGoogle Scholar
  13. Goel, R., & Rich, D. (1989). On the economic incentives for taking bribes. Public Choice, 61, 269–275. CrossRefGoogle Scholar
  14. Gupta, S., Davoodi, H., & Alonso-Terme, R. (2002). Does corruption affect income inequality and poverty? Economics of Governance, 3, 23–45. CrossRefGoogle Scholar
  15. Hadri, K. (2000). Testing for stationarity in heterogeneous panel data. Econometric Journal, 3, 148–161. CrossRefGoogle Scholar
  16. Im, K. S., Pesaran, M. H., & Shin, Y. (2003). Testing for unit roots in heterogeneous panels. Journal of Econometrics, 115, 53–74. CrossRefGoogle Scholar
  17. Johnston, M. (1989). Corruption, inequality, and change. In P. M. Ward (Ed.), Corruption, development and inequality (pp. 13–37). London: Routledge. Google Scholar
  18. Kao, C., & Chiang, M. H. (1999). On the estimation and inference of a cointegrated regression in panel data. Working paper, Syracuse University. Google Scholar
  19. Kweit, R. W., & Kweit, M. G. (1998). People and politics in urban America. London: Routledge. Google Scholar
  20. Levin, A., Lin, C. F., & Chu, C. (2002). Unit root tests in panel data: Asymptotic and finite-sample properties. Journal of Econometrics, 108, 1–24. CrossRefGoogle Scholar
  21. Li, H., Xu, L. C., & Zou, H. F. (2000). Corruption, income distribution, and growth. Economics and Politics, 12, 155–182. CrossRefGoogle Scholar
  22. Lütkepohl, H. (1982). Non-causality due to omitted variables. Journal of Econometrics, 19, 267–378. CrossRefGoogle Scholar
  23. Meier, K. J., & Holbrook, T. M. (1992). I seen my opportunities and I took’em: Political corruption in the American states. Journal of Politics, 54, 135–155. CrossRefGoogle Scholar
  24. Maddala, G. S., & Wu, S. (1999). A comparative study of unit root tests with panel data and a new simple test. Oxford Bulletin of Economics and Statistics, 61, 631–652. CrossRefGoogle Scholar
  25. Maxwell, A. E., & Winters, R. F. (2004). A quarter century of data on corruption in the American states. Mimeo. Google Scholar
  26. Pedroni, P. (1999). Critical values for cointegration tests in heterogeneous panels with multiple regressors. Oxford Bulletin of Economics and Statistics, 61, 653–670. CrossRefGoogle Scholar
  27. Pedroni, P. (2000). Fully modified OLS for heterogeneous cointegrated panels. Advanced in Econometrics, 15, 93–130. CrossRefGoogle Scholar
  28. Pedroni, P. (2004). Panel cointegration: Asymptotic and finite sample properties of pooled time series tests with an application to the PPP hypothesis: New results. Econometric Theory, 20, 597–627. CrossRefGoogle Scholar
  29. Pesaran, H. M., Shin, Y., & Smith, R. P. (1999). Pooled mean group estimation of dynamic heterogeneous panels. Journal of the American Statistical Association, 94, 621–634. CrossRefGoogle Scholar
  30. Phillips, P., & Moon, H. (1999). Linear regression limit theory for nonstationary panel data. Econometrica, 67, 1057–1111. CrossRefGoogle Scholar
  31. Ravallion, M. (1997). Can high-inequality developing countries escape absolute poverty? World Bank Policy Research Working Paper 1775. Google Scholar
  32. Shughart, W. F. II, Tollison, R.D., & Yan, Z. (2003). Rent seeking into the income distribution. Kyklos, 56, 441–456. CrossRefGoogle Scholar
  33. Tanzi, V. (1998). Corruption around the world: Causes, consequences, scope, and cures. IMF Staff Papers, 45, 559–594. Google Scholar
  34. Uslaner, E. (2006). Corruption and inequality. UNU-WIDER Research Paper 34. Google Scholar
  35. You, J., & Khagram, S. (2005). A comparative study of inequality and corruption. American Sociological Review, 70, 136–157. CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC 2009

Authors and Affiliations

  • Nicholas Apergis
    • 1
  • Oguzhan C. Dincer
    • 2
    Email author
  • James E. Payne
    • 3
  1. 1.Department of Banking and Financial ManagementUniversity of PiraeusPiraeusGreece
  2. 2.Department of EconomicsIllinois State UniversityNormalUSA
  3. 3.College of Arts and SciencesIllinois State UniversityNormalUSA

Personalised recommendations