Economic Regulations, Red Tape, and Bureaucratic Corruption in Post-Communist Economies

Abstract

Should state regulatory involvement in the economy necessarily generate corruption? While excessive regulatory burden is often treated as a cause of corruption, this paper argues otherwise. It distinguishes regulatory policy, or de jure regulatory regimes from regulatory implementation and offers a more nuanced argument about the relationship between state regulations and bureaucratic corruption. The analysis of business survey data covering 25 post-communist economies demonstrates that mechanisms of regulatory implementation, rather than heavy-handed regulatory policy, are responsible for bribery. This analysis draws attention to the theoretical distinction between different types of regulatory hurdles and their differential effects on the quality of governance.