BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 10/2008:
Regulatory bottlenecks, transaction costs and corruption: A cross-country investigation
Rajeev K. Goel ()
Abstract: This paper uses recent data on a large cross-section of
countries to study the determinants of corrupt activity. The main
contribution is to examine the effects of different types and severities of
government regulations on corrupt activities. The results show that greater
prosperity and democracy lead to less corrupt activity. Variables
representing the degree of fractionalization across three dimensions and
least developed nations are statistically insignificant. Having more
regulation, including number of procedures and time involved across four
categories (business startup, licensing, property registration, and
taxation), leads to greater corruption. More regulatory procedures,
especially for business startups and property registrations, have the most
corruption-enhancing effect. Whereas lengthier procedures also generally
spur corruption, there are important differences. Finally, higher
regulatory transactions costs do not seem to significantly impact
corruption. Policy implications are discussed.
Keywords: corruption; business startup; licenses; property; taxes; fractionalization; democracy; prosperity; (follow links to similar papers)
JEL-Codes: H26; H87; K42; (follow links to similar papers)
24 pages, June 18, 2008
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