The comparative effect of corruption and Piketty's second fundamental law of capitalism on inequality

We hypothesize that corruption, viewed as an institutional distortion has comparatively larger effects on inequality than the second fundamental law of capitalism proposed by Thomas Piketty. Reaffirming that corruption affects inequality in a non-linear fashion, we also find evidence that r−g increases inequality in the short run, indicating that pre-existing holders of capital derive greater shares of income. However, the effect of r−g is not as strong as that of corruption and is insignificant in highly unequal countries. This suggests that institutional factors play a more important role than the second fundamental law of capitalism in presence of high inequality.