The relationship of corruption, income inequality, and economic growth: The example of the vulnerable five countries (1995-2019)

Although economic growth is the primary target for countries, it is known that there are social and economic factors that both affect and are affected by economic growth. In this study, it is aimed to empirically examine the relationship between corruption and income inequality and economic growth in the sample of the Fragile 5 countries (Brazil, India, Indonesia, South Africa, and Turkey) for the period 1995-2019. In the study model, data sets related to the variables were obtained from the World Bank, Transparency International and World Income Inequality databases. In the panel data analysis process of the study, Breusch-Pagan (1980) LM test, Pesaran (2004) Scaled LM test and Pesaran (2004) CD test for cross-section dependency test; Pesaran and Yamagata's (2008) Delta Homogeneity test for homogeneity test; Pesaran's (2004) CIPS panel unit root test for unit root test; Westerlund and Edgerton's (2007) LM cointegration test for long-term cointegration relationship test; and Eberhardt and Bond's (2009) Augmented Mean Group Effect test for long-term coefficient estimation test were used. According to the empirical findings of the study, it has been determined that the decrease in corruption negatively affects economic growth in Indonesia, while the increase in income inequality positively affects economic growth in India, Indonesia, and South Africa. In addition, the increase in gross fixed capital formation, which is used as a control variable in the model, positively affects economic growth in Brazil and South Africa; In India, it has been concluded that it has a negative effect on economic growth. No statistically significant effect of corruption, income inequality and gross fixed capital formation on economic growth could be detected in the Turkish sample. Keywords: Corruption, Income Inequality, Economic Growth, Fragile Five, Panel Data Analysis