The institutional dimension of the inequality–corruption nexus: A varieties of capitalism assessment

Are unequal societies prone to the abuse of economic power to influence political decisions for private gains? We investigate how changes in inequality affect changes in corruption, controlling for comparative political economy factors. Our varieties of capitalism (VoC) approach explains corruption trends from an institutional viewpoint: liberal market economies (LMEs) exhibit lower corruption despite having high inequality. Coordinated market economies exhibit lower inequality but higher corruption, while state-led non-liberal economies have low inequality despite showing a range of degrees of corruption. Resource exporting economies show high corruption as well as inequality, akin to developing countries despite having higher national incomes. The relationship between changes in inequality and corruption diverges between the different VoC: strongly positive in coordinated and state-led market economies, of an unclear sign in resource-exporting economies, weak in resource-poor developing countries, and downright negative in LMEs. Institutions are thus critical mediators of the socioeconomics of corruption.