EconomicInequalityandCorruption.pdf

Economic Inequality and Corruption 1 Boris Begovi? Center for Liberal-Democratic Studies (CLDS) boris.begovic@clds.org.yu and School of Law, University of Belgrade begovic@nomos.ius.bg.ac.yu Abstract A review of recent contributions to the explorations of the relations between economic inequality and corruption demonstrates that corruption as a factor of inequality has been poorly theoretically explained, although some empirical evidence has been tracked down. More convincing theoretical explanations have been offered regarding inequality as one of the factors of corruption. A theoretical model in which economic inequality is one of the factors (explanatory variables) of judicial corruption is formulated. Some consequences of this kind of corruption, practically the effects to economic inequality are analyzed. Finally, some policies to combat judicial corruption are been suggested. Key words: Economic inequality, Public expenditures, Judicial corruption, Transaction costs, Rule of Law JEL codes K49, K41 1 I am grateful to Gordana Matkovic, Bosko Mijatovic, and Marko Paunovic and the participant of the 3rd World Bank Conference on Inequality “Inequality, Politics and Power” for helpful comments and suggestions. Naturally, none of them is to be held responsible for possible remaining errors and value judgments in this paper. The research has been supported by a grant from the John Templeton Foundation. The opinions expressed in this paper are those of the author and do not necessarily reflect the views of the John Templeton Foundation. I Introduction Economic research into the relations between economic inequality and corruption is rather young discipline; it has begun rather recently, with most of the relevant contributions published in the last five years. There are two basic approaches to these relations. The first approach is focused to the consequences of corruption in terms of its effects to the change of economic inequality and the second approach explores econ