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Financial settlement modes and corruption: evidence from developed nations

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  • Goel, Rajeev K.
  • Mehrotra, Aaron

Abstract

Using recent pooled data from several developed nations, the paper uniquely examines whether the composition of payment instruments has a bearing on the prevalence of corruption in a country. Our results suggest that the choice of instruments matters. Paper credit transfer transactions are consis-tently associated with corrupt activities, while credit card transactions tend to reduce them. Cheques generally increase corruption, the results with respect to nonpaper credit transfers are mixed, while direct debits fail to show significant effects on corruption. These findings hold for alternative corruption measures and when allowance is made for endogeneity of payment instruments.

Suggested Citation

  • Goel, Rajeev K. & Mehrotra, Aaron, 2011. "Financial settlement modes and corruption: evidence from developed nations," BOFIT Discussion Papers 4/2011, Bank of Finland Institute for Emerging Economies (BOFIT).
    • Handle: RePEc:zbw:bofitp:bdp2011_004
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    References listed on IDEAS

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    More about this item

    Keywords

    Corruption; Cheques; Credit card; Cash; Direct debit; Payment instruments;
    All these keywords.

    JEL classification:

    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior
    • G3 - Financial Economics - - Corporate Finance and Governance
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • F3 - International Economics - - International Finance

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