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Financial payment instruments and corruption

  • Rajeev K. Goel
  • Aaron N. Mehrotra

Using recent pooled data from a number of developed nations, this research 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 consistently add to corrupt activities, while credit card transactions check such endeavours. Cheques mostly 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 using alternate corruption measures and when allowance is made for endogeneity of payment instruments.

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File URL: http://hdl.handle.net/10.1080/09603107.2011.628295
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Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

Volume (Year): 22 (2012)
Issue (Month): 11 (June)
Pages: 877-886

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Handle: RePEc:taf:apfiec:v:22:y:2012:i:11:p:877-886
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  1. Axel Dreher & Friedrich Schneider, 2010. "Corruption and the shadow economy: an empirical analysis," Public Choice, Springer, vol. 144(1), pages 215-238, July.
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  11. Treisman, Daniel, 2000. "The causes of corruption: a cross-national study," Journal of Public Economics, Elsevier, vol. 76(3), pages 399-457, June.
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