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

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  • Goel, Rajeev K.

Abstract

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.

Suggested Citation

  • Goel, Rajeev K., 2008. "Regulatory bottlenecks, transaction costs and corruption: a cross-country investigation," BOFIT Discussion Papers 10/2008, Bank of Finland Institute for Emerging Economies (BOFIT).
    • Handle: RePEc:zbw:bofitp:bdp2008_010
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    Cited by:

    1. Rajeev K. Goel & Ummad Mazhar & James W. Saunoris, 2020. "Business operations, contestability, bureaucratic holdup, and bribe solicitations," Review of Development Economics, Wiley Blackwell, vol. 24(4), pages 1484-1510, November.
    2. Sanchari Choudhury, 2021. "Regulation and Corruption: Evidence from the United States," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 83(4), pages 897-934, August.
    3. Vincenzo Alfano & Salvatore Capasso & Rajeev K. Goel, 2021. "EU accession: A boon or bane for corruption?," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 45(1), pages 1-21, January.
    4. 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.
    5. Rajeev K. Goel & Ummad Mazhar & James W. Saunoris, 2021. "Identifying the corrupt cog in the wheel: Dimensions of supply chain logistics and cross‐country corruption," Australian Economic Papers, Wiley Blackwell, vol. 60(4), pages 693-709, December.
    6. Rajeev K. Goel & Michael A. Nelson, 2021. "Corrupt encounters of the fairer sex: female entrepreneurs and their corruption perceptions/experience," The Journal of Technology Transfer, Springer, vol. 46(6), pages 1973-1994, December.
    7. Goel, Rajeev K. & Nelson, Michael A., 2016. "Shining a light on the shadows: Identifying robust determinants of the shadow economy," Economic Modelling, Elsevier, vol. 58(C), pages 351-364.
    8. Akouwerabou B. Denis, 2016. "Entrepreneurs Establishing Political Connection," SAGE Open, , vol. 6(3), pages 21582440166, August.
    9. Rajeev K. Goel & Ummad Mazhar & James W. Saunoris, 2018. "Market Contestability and Bribe Solicitations: Evidence Across Stages of Firms' Operations," CESifo Working Paper Series 6981, CESifo.

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    More about this item

    Keywords

    Corruption; Business startup; Licenses; Property; Taxes; Fractionalization; De-mocracy; Prosperity;
    All these keywords.

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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