Does corruption cause encumbered business regulations? An IV approach

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 <italic>et al</italic>. (2006) that countries with simple and transparent regulations grow faster.