Governance, Corruption and Income Inequality: A Panel Study of Selected Asian Countries

Abstract

The study investigated the relationship among governance, corruption, and income inequality in selected Asian countries over period 2000-2021. Data for Governance (Political Governance and Institutional Governance) was taken from World Governance Indicators (WGI). Principal Component Analysis (PCA) was used to create the governance index by using four indicators of WG: Political stability; no violence and voice & accountability; Rules of law and Control of corruption. Data of income inequality (Gini index) had been collected from Global Consumption and Income Project (GCIP). Data on corruption perception index (CPI) as proxy for corruption were taken from Transparency International. Fully Modified and Dynamic OLS (FMOL and DOLS) were used for dynamic analysis. The study explored inverse connection between governance and income inequality while positive impact of corruption on income inequality. Study suggested that the country should improve the quality of Governance as it leads to the improvement in the institutions. The improved institutions and politically stable country can reduce the corruption and income inequality. Finally, policymakers should establish the governance improving policies to tackle the corruption and income inequality.