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

  • Goel, Rajeev K.



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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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
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