The impact of corruption on the poor and on poverty reduction processes has now been reasonably widely discussed. The effect of corruption on the poor can be gauged through both its direct impact (through, for example, increasing the cost of public services, lowering their quality and often all together restricting poor people's access to such essential services as water, health and education) and the indirect impact (through, for example, diverting public resources away from social sectors and the poor, and through limiting development, growth and poverty reduction). While this impacts negatively on most of the segments of the society, it is suggested that the poor are more vulnerable both in terms of being easy targets for being subjected to extortion, bribery, double-standards and intimidation as well as in terms of being hit by the negative and harsh consequences of corruption on country's overall development processes. So, in addition to the negative impact of corruption, there is also an element of disproportionality and inequality. The following short examples (drawing on research, studies and diagnostic tools) are set to demonstrate some of the negative and disproportionate impact of corruption on the poor.
Corruption affects income inequality and poverty
As well as affecting economic efficiency corruption can also have distributional consequences. This affects income inequality and poverty by reducing economic growth, the progressivity of the tax system, the level and effectiveness of social programs, and by perpetuating an unequal distribution of asset ownership and unequal access to education. These findings, based on various empirical analysis, hold for countries with varying growth experiences, at different stages of development, and using various indices of corruption (used to compare the correlation of corruption with real per capita GDP, Gini coefficient and quintile income shares, etc). In a cross-section of 37 countries, a significant impact of corruption on inequality was found, while taking into account various other exogenous variables. When controlling for GDP per head, this impact remains significant at a 10 % level. It was concluded that a deterioration in a country's corruption index of 2.5 points on a scale of 0 to 10 is associated with the same increase in the Gini coefficient as a reduction in average secondary schooling of 2.3 years. Researchers have also tested various instrumental variables to ascertain whether the relationship between corruption and inequality is not a case of reverse causality.
Corruption is a core poverty issue as viewed by the poor themselves
Corruption emerges as a core poverty issue as a result of the participatory poverty assessments carried out within the framework of World Bank's Voices of the Poor initiative that brings together experiences of over 60,000 poor men and women around the world. Poor people engaged in the study reported hundreds of incidents of corruption as they attempt to seek health care, educate their children, claim social assistance, get paid, attempt to access justice or police protection, and seek to enter the marketplace.