CORRUPTION AND INCOME INEQUALITY IN ASIAN COUNTRIES: BOOTSTRAP PANEL GRANGER CAUSALITY TEST

The purpose of this study is to investigate the causal relationship between corruption and income inequality experienced in ten Asian economies over the period 1995 to 2010. This study utilizes the bootstrap panel Granger causality approach, which allows both cross-sectional dependence and heterogeneity across countries, and is based on seemingly unrelated regressions (SUR) systems and Wald tests with country-specific bootstrap critical values. The empirical results show that there is a unidirectional causality from corruption to income inequality in China and the Philippines. Meanwhile, a one-way causal relationship running from income inequality to corruption exists in Indonesia, Japan, Korea, and Thailand.