Informal Institutions and Corruption

The academic literature has traditionally admitted the interrelation between culture as informal culture and institutions as formal culture. However theoretical and empirical understanding of the relationship between culture and corruption is still limited. The interdependence between informal institutions and corruption indicates that the extent of corruption in different countries can be explained by several indicators of national culture. Drawing on Hofstede cultural dimensions theory and quantitative data by Transparency International and the data on noncash payments, the study investigates the relation between the level of corruption, cultural dimensions and the use of noncash payments in more than 200 countries. The study considers the use of noncash payments as a measurement of corruption and informal culture. This allows one to separate the effect of culture from the original economic and institutional environment. The use of noncash payments is compared to Corruption Perceptions Index by Transparency International and the measurement of the informal economy and correlation between the variables of corruption is found. Moreover, it is explained by the cultural dimensions of Hofstede like masculinity and individualism. The results imply that a more comprehensive treatment of the influence of culture on corruption and the use of noncash payments might be necessary. This work also provides several prospects for future research. One possible implication of the results can be the alteration of national culture for reducing corruption.