Assessing the impact of wealth inequality on state capture in Latin America

Abstract

PurposeThis study aims to analyze the effects of economic inequalities on state capture in Latin America. Economic inequalities are the defining issues of our time. While the effect of economic inequality has been explored before on its impact on state capture in Latin America, it has often been done in a qualitative manner. Moreover, most quantitative research to date uses poor proxy variables to assess the impact of inequalities on corruption and or state capture, such as the Gini coefficient, which suffers from a lot of missing data.Design/methodology/approachA random effects regression model is used to enable the exploitation of between level variation to greater generalize the results across the Latin American region while minimizing bias to the coefficient estimates.FindingsThe results demonstrate that the top 1% wealth inequality is highly statistically significant and positive in explaining the variation in state capture. The greater the share of wealth the 1% hold, the more state capture we should expect.Originality/valueTo the best of the authors’ knowledge, this paper presents the first empirical study using a novel variable, the top 1% share wealth inequality derived from the World Inequality Database that directly measures the top 1%’s share of wealth overall. The study examines the empirical effect of the top 1%’s share of wealth inequality in contributing to state capture. Nineteen Latin American countries are analyzed across the temporal period 1996–2021.