Everyday Cash Usage and Corruption Perception: Evidence From a Panel of Countries

Abstract

This paper examines the relationship between cash usage in consumer transactions and corruption perception for a panel of 29 developed countries from 2012 to 2024. We construct a unique dataset based on payment diary studies conducted in these countries to gauge the share of cash transactions in the total volume of consumer payments. Using Bayesian Model Averaging, we find strong evidence that cash prevalence affects the corruption perception. Notably, traditional macroeconomic variables show minimal impact on corruption perception, indicating that payment habits may be more influential than broader economic conditions. These findings suggest that policies promoting electronic payments could enhance transparency and reduce perceived corruption by creating traceable transaction records that limit opportunities for corrupt practices.