The misery index, corruption and income inequality in Latin American Countries: A panel cointegration and causality analysis

Abstract

The globalization process has led to considerable increases in the flow of goods, services and financial assets, and thus global production and wealth have risen substantially during the past 40 years. However, discussion has now centered around the rising income inequality and poverty in some parts of the world. In this regard, the Latin American region is one of the leading regions in terms of income inequality. This study investigates the interaction among misery index, corruption and income inequality in Latin American countries during the 2002-2014 period, employing the Westerlund and Edgerton (2007) LM bootstrap cointegration test and the Kónya (2006) bootstrap panel Granger causality test. The findings reveal that increases in both the misery index and corruption played a part in the increases in income inequality. Furthermore, the results of the causality test reveal unidirectional causality from the misery index to income inequality and bidirectional causality between corruption and income inequality.