Gender inequality, corruption and economic development

Abstract

We investigate the effect of bureaucratic corruption on economic development when women are discriminated against in the labor market. The analysis is based on a dynamic general equilibrium model in which capital accumulation drives economic development. The government appoints bureaucrats to administer public policy. Corruption arises due to the opportunity for bureaucrats to embezzle public funds. In the event of detection and dismissal, the private sector serves as the bureaucrats' outside option. Our main results can be summarized as follows: first, when the public sector is a more gender-equal employer than the private sector, female bureaucrats are less corrupt than male; second, corruption and development are jointly determined allowing the possibility of a poverty trap; and third, a policy to increase female participation in the public sector potentially reduces corruption and fosters economic development.