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We investigate the intricate relation between corruption and income inequality in China based on provincial panel data of 1996–2014. Our analysis shows that lower corruption is associated with higher income inequality. This seemingly counter-intuitive result, however, is consistent with findings from countries with a large informal sector, particularly those in Latin America. Institutional reform reduces corruption but also imposes additional costs on the participants in the informal sector. The latter effect, at least initially, exacerbates inequality, giving rise to the negative correlation. After the informal sector in China is considered, that negative relation vanishes. Moreover, when reform is accompanied by measures protecting the poor (such as those taken in the agricultural reform occurring in early 2000s), its perverse impact on inequality is significantly reduced. Lastly, public investment is positively associated with income inequality as the former, generally financed by taxation, may transfer income from the taxpayers to the business elites. [ABSTRACT FROM AUTHOR]

Using annual data from seventeen Latin American economies observed over the period 1982-2009 and a heterogeneous panel regression based on the pooled mean group approach of Pesaran et al. (1999), this study provides evidence to support the following findings: (1) the existing trade connection between China and Latin America has had a positive and significant effect on Latin American countries' financial development since the 1990s, (2) trade openness plays a positive role in Latin American economies' financial development, and (3) the economic development of Latin American countries has a positive influence on their financial development in the long run, but have a negative effect in the short run. [ABSTRACT FROM AUTHOR]