When bribery helps the poor

Abstract

The debate about the effect of corruption on income distribution suffers from a number of problems. The main issues are the use of perception-based measures of corruption, which implicitly favours one side of the debate, and a too narrow conception of agency involved in corruption. By relying on direct and grained evidence of bribery in 106 industrialised and industrialising states, and by appreciating the role of agency on the part of bribers, this article finds support for an emerging view that the effect of corruption on inequality is conditional. Under poor institutional conditions, entrepreneurial-related bribery is associated with an increase in the relative income share of the poorest 40%, mitigating disposable income inequality. The results are robust to the use of different income-distribution measures and data sources, as well as different specifications. While wide-spread bribery and corruption in general may be detrimental to longer term socio-economic progress, it is important not to ignore the incentives and constraints that lead people to use bribery as a means of survival.