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Does corruption cause encumbered business regulations? An IV approach

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In this research we attempt to understand the effects of corruption on business regulations measured by number of procedures, time and costs involved in satisfying governmental requisites. Using Two-Stage-Least Squares (2SLS) methods we lessen the problems associated with endogeneity and uncovered the existence of a robust, positive, statistically significant and quantitatively large direction channel from corruption to encumbered business regulations. These results suggest the need to deter corruption in order to improve business regulations. The quest to reduce corruption worldwide acquires new relevancy given the findings of Djankov et al. (2006) that countries with simple and transparent regulations grow faster.
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Keywords: D73; K42; O5; business regulations; corruption; instrumental variables

Document Type: Research Article

Affiliations: 1: Department of Finance, IESA, PO Box 02 5255MiamiFL 33102-5255, USA 2: Department of Mathematics and Statistics,Universidad Simon Bolívar, Caracas, Venezuela 3: Barna School of Business, Santo Domingo, Dominican Republic 4: Industrias Metálicas Special CA, Valencia, Venezuela 5: Universidad Teconológica del Centro, Information and Engineering, Valencia, Venezuela

Publication date: 2013-01-01

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