Do Corruption, Inflation and Unemployment Influence the Income Inequality of Developing Asian Countries?

Abstract

Income inequality is one of the main issues influencing various economic aspects of nations. Thus, the current study aims to examine the dynamic role of corruption, inflation and unemployment on income inequality. For this purpose, 15 years balance panel data from 2006 to 2020 of 12 developing Asian countries is collected from the transparency international and World Bank Indicators (WDI) databases. Moreover, GINI Index which is used to measure the income inequality is considered as a variable of interest that indicates income inequality whereas, interest rate, corruption, inflation and unemployment are selected as independent variables. The Random Effect Model (REM) and Generalized Method of Moments (GMM) are used to examine the relationship among the selected variables. The results reveal that corruption, inflation and unemployment have a significant positive relationship with the GINI index hence, are core factors that increase the income inequality level in developing Asian countries. The results help to guide policymakers while formulating the regulations to control income inequality by focusing more on corruption, inflation and unemployment factors.