IS CORRUPTION INHERENTLY BAD? : The effect of corruption on the Palma ratio: A cross-regional study of Brazil's federal states

Sammanfattning: This thesis analyzes if there, given the size of the informal sector, is an effect of corruption on income inequality, here defined as the Palma ratio. Estimations are done with a fixed effects ordinary least squares regression using panel data for 19 federal states of Brazil over every other year between 2006-2014. The results provide evidence that corruption increases income inequality when the informal sector is smaller than 37.97%, but decreases inequality when the informal sector exceeds 55.34%. The findings are robust to several sensitivity checks. The gained insight of the relationship between corruption and income inequalityusing a microeconomic perspective is the main academic contribution of this thesis.