Azwar Iskandar


It is widely believed that corruption is a cause of income inequality and a barrier to successful its eradication. It undermines the efforts of developing countries, including Indonesia to alleviate income inequality. It is also argued that the increased inequality caused by corruption worsens the position of the poorest people in a society as it reduces public resources available for social spen-ding of government. In addition, corruption might have a negative impact on the quality and quantity of public services, such as education and health services. This study designed to know the long run and short run impacts of corruption on inequality of income. The study uses secondary data from World Bank and Transparency International then Auto Regressive Distributed Lag (ARDL) and dynamic Error Correction Model (ECM) during the year of 1995-2017. The results of study indicate that corruption has significant effects on the level of income inequality both in the short and long run. The negative implication of corruption on citizens’ life is a major disaster in the economy and harmful to the growth and development of the people in Indonesian particularly, and the economy in general. The simple Pearson correlation findings also indicate that corruption has significant distributional consequences by affecting government expenditures. Therefore, the raise of corruption increases income inequality as it reduces the effectiveness of government spending on education, health and final consumption for society. Thus, it can be concluded that for the Indonesian context, an increased inequality due to corruption has worsened the position of the poorest as less resources available for social spending.


Corruption; income; inequality; ARDL; economy

Full Text:



Adenike, E. (2013). An econometric analysis of the impact of corruption on economic growth in Nigeria. Journal of Business Management and Economics, 4(3), 054-065.

Ajie, H. A., & Wokekoro, O. E. (2012). The impact of corruption on sustainable economic growth and development in Nigeria. International Journal of Economic Development Research and Investment, 3(1).

Aliyu S., & Elijah, A. (2008). Corruption and economic growth in Nigeria: 1986-2007. Munich Personal RePEc Archive (MPRA), MPRA paper No. 12504. 1 – 20. Retrieved from 12504/.

Azfar, O., & Gurgur, T. (2005). Does corruption affect health and education outcomes in the Philippines? SSRN Electronic Journal, 4(7). doi: 10.2139/ssrn.723702.

BPS. (2018). Statistik indikator ekonomi Indonesia. Retrieved from

Chetwynd, E., Chetwynd, F., & Spector, B. (2003). Corruption and poverty: a review of recent literature. Management Systems International. Retrieved from

Chong, A., & Calderon, C. (2000a). Institutional quality and income distribution. Economic Development and Cultural Change, 48(4), 761-786.

Chong, A., & Calderon, C. (2000b). Institutional quality and poverty measures in a cross-section of countries. Economics of Governance, 1(2), 123-135.

Dartanto, T., & Nurkholis. (2013). The determinants of poverty dynamics in Indonesia: evidence from panel data. Bulletin of Indonesian Economic Studies, 49(1), 61-84. doi: 10.1080/00074918.2013. 772939.

Dickey, D. A., & Fuller, W. A. (1981). Likelihood ratio statistics for autoregressive time series with a unit root. Econometrica, 49(4), 1057–1072.

Dobson, S., & Ramlogan-Dobson, C. (2010). Is there a trade-off between income inequality and corruption? Evidence from Latin America. Economic Letters, 107(2), 102-104. doi: 10.1016/j.econlet. 2009.12.038.

Glaeser, E., Scheinkman, J., & Shleifer, A. (2003). The injustice of inequality. Journal of Monetary Economics, 50(1), 199-222. doi: 10.1016/S0304-3932(02)00204-0.

Gupta, S., Davoodi, H., & Alonso-Terme, R. (2002). Does corruption affect income inequality and poverty? Economics of Governance, 3(1), 23-45. doi: 10.1007/s101010100039.

Gyimah-Brempong, K. (2002). Corruption, economic growth, and income inequality in Africa. Economics of Governance, 3(3), 183-209. doi: 10.1007/s101010200045.

Indonesia-Investments. (2018). World Bank positive about economic growth Indonesia in 2018. Retrieved from

Jajkowicz, O., & Drobistzova, A. (2015). The effect of corruption on government expenditure allocation in OECD countries. Retrieved from 3041251.pdf.

Johansen, S., & Juselius, K. (1990). Maximum likelihood estimation and inference on cointegration - with applications to the demand for money. Oxford Bulletin Economics Statistics, 52(2), 169-210. doi: 10.1111/j.1468-0084.1990. mp52002003.x.

Johnston, M. (1989). Corruption, inequality, and change, in P. M. Ward (Ed.). Corruption, Development and Inequality (pp.13-37). London: Routledge.

Jong-Sung, Y., & Khagram, S. (2005). A comparative study of inequality and corruption. American Sociological Review, 70(1). doi: 10.1177/000312240 507000107.

Kaufmann, D., & Vicente, P. C. (2005). Legal corruption. Retrieved from

Keefer, P. (2004). A Review of the political economy of governance: from property rights to voice. Paper prepared for project on ‘The Consequences of Political Institutions in Democracy’. World Bank Research Working Paper (3315). Retrieved from

Keefer, P., & Knack, S. (1997). Why don’t poor countries catch up? A cross-national test of an institutional explanation. Economic Inquiry, 35, 590-602. doi: 10.1111/j.1465-7295.1997. tb02035.x.

Levine, R., & Renelt, D. (1992). A sensitivity analysis of cross-country growth regressions. The American Economic Review, 82(4), 942-963.

Li, H., Xu, L. C., & Zou, H. F. (2000). Corruption, income distribution, and growth. Economics and Politics, 12, 155-182.

Li, H., & Zou, H. (2002). Inflation, growth, and income distribution: a cross country study. Annals of Economics and Finance, 3, 85-101.

Mauro, P. (1995). Corruption and growth. Quarterly Journal of Economics, 110(3), 681-712. doi: 10.2307/2946696 .

Mauro, P. (1997). The effects of corruption on growth, investment, and government expenditure: a cross-country analysis. Corruption and The Global Economy, 83. Retrieved from

Meltzer, A. H., & Richard, S. F. (1981). A rational theory of the size of government. Journal of Political Economy, 89(5), 914-927. doi: 10.1086/261013.

Mo, P. H. (2001). Corruption and economic growth. Journal of Comparative Economics, 29, 66-79. doi: 10.1006/jcec.2000.1703.

Murphy, K. M., Shleifer, A., & Vishny, R. W. (1991). The allocation of talent: implications for growth. Quarterly Journal of Economics, 106(2), 503-30. doi: 10.2307/2937945.

Murphy, K. M., Shleifer, A., & Vishny, R. W. (1993). Why is rent-seeking so costly to growth? The American Economic Review, 83(2), 409-414.

Ndikumana, L. (2006). Corruption and pro-poor growth outcomes: evidence and lessons for African countries. Working Paper Series No. 120, Political Economy Research Instituted.

North, D. C., (1991). Institutions. Journal of Economic Perspective, 5(1), 97-112.

Pesaran, M. H., & Shin, Y. (1999), “An autoregressive distributed lag modelling approach to cointegration analysisâ€, in Strom, S. (Ed.), paper presented at Econometrics and Economic Theory in the 20th Century: The Ragnar Frisch Centennial Symposium, Cambridge University Press, Cambridge.

Pesaran, M. H., Shin, Y., & Smith, R. J., (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289-326. doi: 10.1002/jae.616.

Phillips, P. C. B., & Perron, P. (1988). Testing for a unit root in time series regression. Biometrica, 75(2), 335–446. doi: 10.1093/biomet/75.2.335.

Shahbaz, M., (2012). Multivariate–based Granger causality between financial deepening and poverty: The case of Pakistan. Paper presented, 13th Annual Research Conference on “Population Wellbeing: A Development Imperative†was held at Institute of Business Administration (IBA), Karachi (Pakistan).

Suryadarma, D. (2012). How corruption diminishes the effectiveness of public spending on education in Indonesia. Bulletin of Indonesian Economic Studi-es, 48(1), 85-100. doi: 10.1080/00074918.2012.654485.

Tanzi, V. (1998). Corruption around the world: causes, consequences, scope, and cures. IMF Staff Papers, 45, 559-594.

The Jakarta Post. (2018). Behind the rise of income inequality in Indonesia. Retrieved from

Transparency International. (2018). Corruption Perception Index 2017. Retrieved from

Uddin, G. S., Shahbaz, M., Arouri, M. E., & Teulon, F. (2013). Financial development and poverty reduction nexus: a cointegration and causality analysis in Bangladesh. MPRA Paper No. 49264.

Uma, K. E., & Eboh, F. E. (2013). Corruption, economic development and emerging markets: evidence from Nigeria. Asian Journal of Management Sciences and Education, 2(3).

Wei, S. (2000). How taxing is corruption on international investors? Review of Economics and Statistics, 52(1), 1-11. doi: 10.1162/003465300558533.

World Development Indicators (WDI). (2018). Retrieved from

Yusuf, M. (2013). Corruption, inequality of income and economic growth in Nigeria. MPRA Paper No. 52348. Retrieved from



  • There are currently no refbacks.

Jurnal Tata Kelola & Akuntabilitas Keuangan Negara registered in:

Google Scholar


Creative Commons License
Jurnal Tata Kelola dan Akuntabilitas Keuangan Negara is licensed under
a Creative Commons Attribution-ShareAlike 4.0 International License.

View My Stats