Modelling growth implication of corruption and income inequality in Nigeria

Abstract

This study looks at how corruption affected Nigeria's economic development from Q1 of 1996 to Q2 of 2020, controlling for wealth inequality. It expands on the theoretical foundation of the corruption ideas of the "sand in the wheel" and "grease in the wheel." The study used a variety of methods to estimate the growth implication of rising corruption and income inequality in Nigeria using the vector error correction (VECM) framework. Time series analysis indicates that a rise in corruption promote economic growth. Additionally, unidirectional causality was discovered to flow from Corruption Perception to Per Capita Income (PCI) and from Gini Coefficient (GINI) and the income gap in Nigeria has exacerbated corruption according to the impulse response graph. According to the study, corruption is a result of growing wealth inequality in Nigeria, which fuels the threat of corruption. It also supports the grease hypothesis by unintentionally stimulate productivity.