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Financial payment instruments and corruption

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  • Rajeev K. Goel
  • Aaron N. Mehrotra

Abstract

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.

Suggested Citation

  • Rajeev K. Goel & Aaron N. Mehrotra, 2012. "Financial payment instruments and corruption," Applied Financial Economics, Taylor & Francis Journals, vol. 22(11), pages 877-886, June.
    • Handle: RePEc:taf:apfiec:v:22:y:2012:i:11:p:877-886
    DOI: 10.1080/09603107.2011.628295
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    References listed on IDEAS

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    1. G. Gulsun Arikan, 2004. "Fiscal Decentralization: A Remedy for Corruption?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 11(2), pages 175-195, March.
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    7. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters, in: Essays in the Economics of Crime and Punishment, pages 1-54, National Bureau of Economic Research, Inc.
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    9. La Porta, Rafael & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," Journal of Finance, American Finance Association, vol. 52(3), pages 1131-1150, July.
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    1. repec:hhs:bofitp:2011_004 is not listed on IDEAS
    2. Rajeev K. Goel & Aaron N. Mehrotra, 2012. "Financial payment instruments and corruption," Applied Financial Economics, Taylor & Francis Journals, vol. 22(11), pages 877-886, June.
    3. Quintano, Claudio & Mazzocchi, Paolo, 2013. "The shadow economy beyond European public governance," Economic Systems, Elsevier, vol. 37(4), pages 650-670.
    4. Singh, Sunny & Bhattacharya, Kaushik, 2015. "Does easy availability of cash effect corruption? Evidence from panel of countries," MPRA Paper 65934, University Library of Munich, Germany.
    5. Claudio Quintano & Paolo Mazzocchi, 2018. "Behind the GDP: some remarks on the shadow economy in Mediterranean countries," European Journal of Law and Economics, Springer, vol. 45(1), pages 147-173, February.
    6. Caroline Stern, 2017. "Fintechs and their emergence in banking services in CESEE," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue Q3/17, pages 42-58.
    7. Rajeev K Goel & Jelena Budak & Edo Rajh, 2013. "Bureaucratic Monopoly and the Nature and Timing of Bribes: Evidence from Croatian Data," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 55(1), pages 43-58, March.
    8. Singh, Sunny Kumar & Bhattacharya, Kaushik, 2017. "Does easy availability of cash affect corruption? Evidence from a panel of countries," Economic Systems, Elsevier, vol. 41(2), pages 236-247.

    More about this item

    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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