Evidence of the Negative Relationship of Transaction Costs in the Economic Performance of G7+BRICS Countries

Several studies relate institutions and Transaction Costs (TC) based on regulatory aspects. Weak or unreliable institutions open space for corruption, producing as a negative externality the increase in the TC of the economy, the inhibition of doing business and the reduction of economic growth. Although there is a wide debate about the negative relationship between TC and economic performance, little is known about the strength and significance of this relationship. This gap occurs because most of the TC estimates are performed at the microeconomic level. Besides, the few estimates of countries' TCs are from different periods, which makes any analysis impossible. Therefore, the objective of this research is twofold. First, introduce a comparative index of the TCs of the countries. Second, analyze the relationship between the Index of TC and economic performance. The first contribution of this research is to offer a way to compare the TCs of different countries, regardless of the unavailability of estimates of TCs in the countries. Second, provide evidence on how countries 'TCs reflect in their economic performance the negative effects of the inefficiency of the countries' regulatory framework