Financial payment instruments and corruption

Rajeev Goel and Aaron Mehrotra

Applied Financial Economics, 2012, vol. 22, issue 11, 877-886

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.

Date: 2012
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DOI: 10.1080/09603107.2011.628295

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