INTERACTION EFFECT OF INFORMALITY AND CORRUPTION ON INCOME INEQUALITY IN NIGERIA

Engagement in informal economic activities serves as a survival strategy for underprivileged majority in developing economies with high level of corruption. Consequently, this study examined the main and interaction effects of informality and corruption on income inequality in Nigeria from 1996 to 2...

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Published inJournal of Social Sciences (Chişinău) (Online) Vol. V; no. 2; pp. 72 - 86
Main Authors Isayomi, Abiodun Samuel, Akintunde, Temitope Sade, Ogunleye, Akin George
Format Journal Article
LanguageEnglish
Published Technical University of Moldova 01.06.2022
Universitatea Tehnică a Moldovei
Subjects
Economic policy
elite capture
Fiscal Politics / Budgeting
income redistribution
National Economy
shadow economy
Socio-Economic Research
socioeconomic environment
underprivileged majority
underprivileged majority
income redistribution
elite capture
shadow economy
socioeconomic environment
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Summary:Engagement in informal economic activities serves as a survival strategy for underprivileged majority in developing economies with high level of corruption. Consequently, this study examined the main and interaction effects of informality and corruption on income inequality in Nigeria from 1996 to 2020 using autoregressive distributed lag-bound testing technique. The study result showed evidence of long-run relationship among informality, corruption and income inequality. The main effects of informality and corruption on income inequality are negative and statistically significant in both the short and long run. However, corruption reduction in a year was found to reduce income inequality in the subsequent year. Furthermore, the interaction effect of informality and corruption on income inequality was found to be negative and statistically significance in both the short run and the long run. Corruption reduction was found to be a necessary but not sufficient condition for reduction of inequality. Consequently, this study recommended creation of socioeconomic environment conducive for the growth, expansion and eventual formalization of informal businesses. The study also recommended that inequality-reduction be made the end goal of corruption-reduction by ensuring that the proceeds from successful anticorruption campaign are channelled to policies and public projects which redistribute income to the less privileged.
ISSN:2587-3490
2587-3504
DOI:10.52326/jss.utm.2022.5(2).06