Does corruption throw sand into or grease the wheels of financial sector development?

Journal Publication ResearchOnline@JCU
Cooray, Arusha;Schneider, Friedrich
Abstract

This paper examines the relationship between corruption and financial sector development in 106 countries. Using dummy variables to capture different levels of corruption, and interaction terms to see if financial sector development depends on institutional structures, we find evidence to support the ‘sand the wheels’ hypothesis. The results suggest that a decline in corruption is associated with higher levels of financial sector development.

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Public Choice

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Volume

177

ISBN/ISSN

1573-7101

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Pages Count

23

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Publisher

Springer

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DOI

10.1007/s11127-018-0592-7