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Theoretical and Applied Economics
No. 1 / 2018 (614), Spring

Dynamic linkages between corruption, economic growth, and income inequality in Pakistan: Say ‘No’ to corruption

Sheraz Ahmad CHOUDHARY
University of Wah, Pakistan
Khalid Zaman
University of Wah, Pakistan
Shakira EJAZ
University of Wah, Pakistan

Abstract. The objective of the study is to examine the dynamic linkages between corruption, economic growth and income inequality in the context of Pakistan by using an annual time series data from 1992-2016. The study used conventional cointegration techniques including unit root test and cointegration tests for analyzing the stationary properties of the candidate variables and long-run relationship between the variables, while robust least square regression technique is used to minimize the possible outliers from the given models and estimate robust parameter estimates for conclusive findings. The statistics show that the mean value of corruption index is less than the value of 3 out of 6 (1 - low corruption index and 6 - high corruption index), hence we classified that the country has a minimal level of corruption, which somehow support to country’s economic growth via the channel of increase in government saving and consumption, hence the identity matrix of saving and consumption in total income function empirically valid in a given country context. In another regression model, the results confirm that poverty decreases income inequality through the channel of increase gross saving in a country. The impact of corruption on income inequality is largely invisible during the study time period. The study conclude with the fact that high mass level of corruption not only break the country’s economic vision and strategic objectives, while it effects political stability and good governance reforms that ultimately damages the country’s image. The policies should be made in a way to reduce corruption by empowering judiciary, intelligence department, and National Accountability Bureau (NAB) that responsible for creating and presenting healthy image of the country with say ‘No’ to corruption.

Keywords: corruption; income inequality; poverty; economic growth; robust least square regression; Pakistan.

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The Economicity. The Epistemic Landscape, Marin Dinu, 2016

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