Inequality, corruption, and competition in the presence of market imperfections

Arbeitspapier

We analyze the relation between inequality, corruption and competition in a developing economy context where markets are imperfect. We consider an economy where different types of households (efficient and inefficient) choose to undertake production activities. For production, households borrow capital from the credit market. They also incur non-input costs which they could avoid by bribing inspectors. Due to information asymmetry and wealth inequality, the credit market fails to screen out the inefficient types. In addition to the imperfect screening, the inefficient type’s entry is further facilitated by corruption. We analyze the market equilibrium and look at some of the implications. We show that a rise in inequality can lead to an increase in corruption along with greater competition. – corruption ; competition ; credit market ; inequality ; screening

Object Details

• ISBN: 9291907294
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: WIDER Research Paper ; No. 2005/46

Classification and Topics

• Classification: Wirtschaft ; Personal Income, Wealth, and Their Distributions ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection ; Illegal Behavior and the Enforcement of Law ; Microeconomic Analyses of Economic Development
• Subject: Einkommensverteilung ; Korruption ; Wettbewerb ; Kreditmarkt ; Unvollkommener Markt

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Dutta, Indranil ; Mishra, Ajit
• Event: Veröffentlichung
• (who): The United Nations University World Institute for Development Economics Research (UNU-WIDER)
• (where): Helsinki
• (when): 2005

Further information

• Handle: http://hdl.handle.net/10419/63338
• Last update: 10.03.2025, 11:44 AM CET