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Regulatory bottlenecks, transaction costs and corruption: A cross-country investigation

  • Goel, Rajeev K.

    ()

    (BOFIT)

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.

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File URL: http://www.suomenpankki.fi/bofit_en/tutkimus/tutkimusjulkaisut/dp/Documents/dp1008.pdf
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Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 10/2008.

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Length: 24 pages
Date of creation: 18 Jun 2008
Date of revision:
Handle: RePEc:hhs:bofitp:2008_010
Contact details of provider: Postal:
Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland

Phone: + 358 10 831 2268
Fax: + 358 10 831 2294
Web page: http://www.suomenpankki.fi/bofit_en/
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  1. Rajeev K. Goel & Michael A. Nelson, 2005. "Economic Freedom Versus Political Freedom: Cross-Country Influences On Corruption ," Australian Economic Papers, Wiley Blackwell, vol. 44(2), pages 121-133, 06.
  2. Guriev, Sergei, 2003. "Red Tape and Corruption," CEPR Discussion Papers 3972, C.E.P.R. Discussion Papers.
  3. Danila Serra, 2005. "Empirical determinants of corruption: A sensitivity analysis," Economics Series Working Papers GPRG-WPS-012, University of Oxford, Department of Economics.
  4. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 1999. "The Quality of Government," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(1), pages 222-79, April.
  5. Johann Graf Lambsdorff, 2006. "Causes and Consequences of Corruption: What Do We Know from a Cross-Section of Countries?," Chapters, in: International Handbook on the Economics of Corruption, chapter 1 Edward Elgar Publishing.
  6. repec:cup:cbooks:9780521659123 is not listed on IDEAS
  7. Paldam, Martin, 2002. "The cross-country pattern of corruption: economics, culture and the seesaw dynamics," European Journal of Political Economy, Elsevier, vol. 18(2), pages 215-240, June.
  8. Treisman, Daniel, 2000. "The causes of corruption: a cross-national study," Journal of Public Economics, Elsevier, vol. 76(3), pages 399-457, June.
  9. Gary S. Becker, 1968. "Crime and Punishment: An Economic Approach," Journal of Political Economy, University of Chicago Press, vol. 76, pages 169.
  10. Fisman, Raymond & Gatti, Roberta, 2002. "Decentralization and corruption: evidence across countries," Journal of Public Economics, Elsevier, vol. 83(3), pages 325-345, March.
  11. Goel, Rajeev K & Nelson, Michael A, 1998. "Corruption and Government Size: A Disaggregated Analysis," Public Choice, Springer, vol. 97(1-2), pages 107-20, October.
  12. Fabio Mendez & Facundo Sepulveda, 2006. "Optimal Government Regulations and Red Tape in an Economy with Corruption," CEPR Discussion Papers 515, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  13. Graeff, P. & Mehlkop, G., 2003. "The impact of economic freedom on corruption: different patterns for rich and poor countries," European Journal of Political Economy, Elsevier, vol. 19(3), pages 605-620, September.
  14. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross-Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
  15. repec:cup:cbooks:9780521632935 is not listed on IDEAS
  16. Knack, Stephen & Keefer, Philip, 1995. "Institutions and Economic Performance: Cross-Country Tests Using Alternative Institutional Indicators," MPRA Paper 23118, University Library of Munich, Germany.
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