Pros and cons of corruption to income inequality: an extensive literature survey

Corruption, a universal concept with deep historical roots, permeates societies and has varying implications on the economies. This study reviews the existing literature on corruption, with a particular focus on how corruption shapes income inequality, using an analogy of sand- versus grease-the-wheels hypotheses to explore the positive and negative aspects of corruption. Our aim is to contribute to the corruption literature by presenting theoretical and empirical insights in a clear and traceable manner. Previous studies on the relationship between corruption and income inequality have produced mixed results, which can be attributed to variations in data and methodologies. Some studies show positive associations between corruption and income inequality, while others show negative associations, echoing the controversy surrounding the sandand grease-the-wheels hypotheses. However, there is also scant research suggesting a non-linear relationship between corruption and income inequality, characterized by an inverted U-shaped pattern. All of these diverse findings have important implications for policymakers, emphasizing the need for comprehensive reforms that address corruption and simultaneously tackle the immediate challenges faced by low-income individuals during the transitional period. In conclusion, this study systematically discusses the implications of these findings for policymakers and researchers, highlighting the relevance of this research for shaping effective policies and further investigations in this field.