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Inequality, Corruption, and Competition in the Presence of Market Imperfections

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  • Indranil Dutta
  • Ajit Mishra

Abstract

We analyze the relation between inequality, corruption and competition in a developing economy context where markets are imperfect. We consider an economy where different types of households (efficient and inefficient) choose to undertake production activities. For production, households borrow capital from the credit market. They also incur non-input costs which they could avoid by bribing inspectors. Due to information asymmetry and wealth inequality, the credit market fails to screen out the inefficient types.

Suggested Citation

  • Indranil Dutta & Ajit Mishra, 2005. "Inequality, Corruption, and Competition in the Presence of Market Imperfections," WIDER Working Paper Series RP2005-46, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:rp2005-46
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    2. Ajit Mishra & R Ray, 2010. "Informality, Corruption, and Inequality," Department of Economics Working Papers 13/10, University of Bath, Department of Economics.

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