Impact of Corruption on Income Inequality in Pakistan: Say ‘No’ to Corruption

Abstract

Say “No” to corruption, this is a famous sentence about corruption, and also an important element for inclusive development, since corruption benefits only the rich and powerful. In this context, this study analyzes the long-term and short-term relationship between corruption and income inequality in Pakistan. The time range of data used in the study is from 1995 to 2023. The study analyzed and investigated macroeconomic variables such as corruption, government spending, inflation rate, and poverty rate using the Autoregressive Distributed Lag (ARDL) model. As a result of the study, corruption has been shown to increase income inequality, in this case, income inequality increases due to 2 main reasons such as distorted distribution of public resources and reduced access to essential services for low-income families. Similarly, inflation and poverty rates also increase income inequality. On the other hand, it was confirmed that an increase in government spending had a positive effect on reducing inequality. In the end, anti-corruption policies and strategic welfare investments are needed to alleviate income inequality. This study presents policies and its directions for resolving income inequality in Pakistan, and at the same time, emphasizes that institutional reliability and transparent governance are essential for inclusive economic growth.