Competitiveness, corruption, and income inequalities: approaching the ‘Janus’ face of development with simultaneous equation modelling

The present study illustrates the outcomes of a simultaneous equation modelling that investigates the relationship between competitiveness and corruption both directly and indirectly, considering the interlinkages with the broader social structure in a sample of 110 world countries. The empirical results justify a separate analysis of the sample according with the level of human development, and outline the importance of existing income inequalities in addition to economic and social development. In high human development countries, the net effect of competitiveness on corruption is greater than its direct effect due to the indirect (positive) correlation of competitiveness with income inequality. On the contrary, in low human development countries, the final effect of competitiveness on corruption is lower than its direct effects and, therefore, the ensuing improvement on the level of corruption is reduced substantially. This finding may be ascribed to the indirect negative effect stemming from income inequalities, which exacerbate social turbulence and collisions whereas they impinge on social cohesion and institutional resilience. These issues, which are particularly intense under low social development conditions, reduce the direct, non-linear effect of competitiveness on corruption, suggesting the importance of indirect effects.