IDEAS home Printed from https://ideas.repec.org/a/eee/asieco/v23y2012i2p111-129.html
   My bibliography  Save this article

Foreign investment and bribery: A firm-level analysis of corruption in Vietnam

Author

Listed:
  • Gueorguiev, Dimitar
  • Malesky, Edmund

Abstract

Among the concerns faced by countries pondering the costs and benefits of greater economic openness to international capital flows is the worry that new and powerful external actors will exert a corrupting influence on the domestic economy. In this paper, we use a novel empirical strategy, drawn from research in experimental psychology, to test the linkage between foreign direct investment (FDI) and corruption. The prevailing literature has produced confused and contradictory results on this vital relationship due to errors in their measurement of corruption which are correlated with FDI inflows. When a less biased operationalization is employed, we find clear evidence of corruption during both registration and procurement procedures in Vietnam. The prevalence of corruption, however, is not associated with inflows of FDI. On the contrary, one measure of economic openness appears to be the most important driver of reductions in Vietnamese corruption: the wave of domestic legislation, which accompanied the country's bilateral trade liberalization agreement with the United States (US-BTA), significantly reduced bribery during business registration.

Suggested Citation

  • Gueorguiev, Dimitar & Malesky, Edmund, 2012. "Foreign investment and bribery: A firm-level analysis of corruption in Vietnam," Journal of Asian Economics, Elsevier, vol. 23(2), pages 111-129.
    • Handle: RePEc:eee:asieco:v:23:y:2012:i:2:p:111-129
    DOI: 10.1016/j.asieco.2011.11.006
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1049007811001102
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.asieco.2011.11.006?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Nguyen, Anh Ngoc & Nguyen, Thang & Le, Dang Trung & Pham, Quang Ngoc & Nguyen, Dinh Chuc & Nguyen, Duc Nhat, 2008. "Foreign direct investment in Vietnam: Is there any evidence of technological spillover effects," MPRA Paper 7273, University Library of Munich, Germany.
    2. Chuck C Y Kwok & Solomon Tadesse, 2006. "The MNC as an agent of change for host-country institutions: FDI and corruption," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 37(6), pages 767-785, November.
    3. V.N. Balasubramanyam, 2008. "Foreign Direct Investment," Chapters, in: Amitava Krishna Dutt & Jaime Ros (ed.), International Handbook of Development Economics, Volumes 1 & 2, volume 0, chapter 39, Edward Elgar Publishing.
    4. repec:cup:apsrev:v:98:y:2004:i:01:p:191-207_00 is not listed on IDEAS
    5. Bliss, Christopher & Di Tella, Rafael, 1997. "Does Competition Kill Corruption?," Journal of Political Economy, University of Chicago Press, vol. 105(5), pages 1001-1023, October.
    6. Roberta Gatti, 2004. "Explaining corruption: are open countries less corrupt?," Journal of International Development, John Wiley & Sons, Ltd., vol. 16(6), pages 851-861.
    7. Elisabeth Coutts & Ben Jann, 2011. "Sensitive Questions in Online Surveys: Experimental Results for the Randomized Response Technique (RRT) and the Unmatched Count Technique (UCT)," Sociological Methods & Research, , vol. 40(1), pages 169-193, February.
    8. Treisman, Daniel, 2000. "The causes of corruption: a cross-national study," Journal of Public Economics, Elsevier, vol. 76(3), pages 399-457, June.
    9. Kreps, David M, 1997. "Intrinsic Motivation and Extrinsic Incentives," American Economic Review, American Economic Association, vol. 87(2), pages 359-364, May.
    10. Parker, Steve & Phan, Vinh Quang & Nguyen, Ngoc Anh, 2005. "Has the U.S.-Vietnam Bilateral Trade Agreement Led to Higher FDI into Vietnam?," MPRA Paper 1384, University Library of Munich, Germany.
    11. Olken, Benjamin A., 2009. "Corruption perceptions vs. corruption reality," Journal of Public Economics, Elsevier, vol. 93(7-8), pages 950-964, August.
    12. Shang-Jin Wei, 2000. "How Taxing is Corruption on International Investors?," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 1-11, February.
    13. Felipe Larraín & José Tavares, 2004. "Does Foreign Direct Investment Decrease Corruption?," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 41(123), pages 217-230.
    14. Imai, Kosuke, 2011. "Multivariate Regression Analysis for the Item Count Technique," Journal of the American Statistical Association, American Statistical Association, vol. 106(494), pages 407-416.
    15. Tam Bang Vu, 2008. "Foreign direct investment and endogenous growth in Vietnam," Applied Economics, Taylor & Francis Journals, vol. 40(9), pages 1165-1173.
    16. Rafael Di Tella & Alberto Ades, 1999. "Rents, Competition, and Corruption," American Economic Review, American Economic Association, vol. 89(4), pages 982-993, September.
    17. Gerring, John & Thacker, Strom C., 2005. "Do Neoliberal Policies Deter Political Corruption?," International Organization, Cambridge University Press, vol. 59(1), pages 233-254, January.
    18. Stephen Knack & Omar Azfar, 2003. "Trade intensity, country size and corruption," Economics of Governance, Springer, vol. 4(1), pages 1-18, April.
    19. Mr. Vito Tanzi & Mr. Hamid R Davoodi, 1997. "Corruption, Public Investment, and Growth," IMF Working Papers 1997/139, International Monetary Fund.
    20. World Bank, 2010. "World Development Indicators 2010," World Bank Publications - Books, The World Bank Group, number 4373, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sharma, Smriti & Singhal, Saurabh & Tarp, Finn, 2021. "Corruption and mental health: Evidence from Vietnam," Journal of Economic Behavior & Organization, Elsevier, vol. 185(C), pages 125-137.
    2. Julian Donaubauer & Peter Kannen & Frauke Steglich, 2022. "Foreign Direct Investment & Petty Corruption in Sub-Saharan Africa: An Empirical Analysis at the Local Level," Journal of Development Studies, Taylor & Francis Journals, vol. 58(1), pages 76-95, January.
    3. Franco, Chiara & Sanfilippo, Marco & Seric, Adnan, 2015. "What makes linkages "good" linkages? Firms, the investment climate and business support services in Vietnam," IOB Working Papers 2015.09, Universiteit Antwerpen, Institute of Development Policy (IOB).
    4. Addis G. Birhanu & Alfonso Gambardella & Giovanni Valentini, 2016. "Bribery and investment: Firm-level evidence from Africa and Latin America," Strategic Management Journal, Wiley Blackwell, vol. 37(9), pages 1865-1877, September.
    5. Tran, My Thi Ha, 2021. "Public Sector Management And Corruption In Asean Plus Six," OSF Preprints stxw4, Center for Open Science.
    6. Abdul Jalil & Amina Qureshi & Mete Feridun, 2016. "Is Corruption Good or Bad for FDI? Empirical Evidence from Asia, Africa and Latin America," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 63(3), pages 259-271, June.
    7. Axel Demenet & Hoang-Anh Ho & Sarah Morcillo, 2017. "Firm-level corruption: Unravelling sand from grease," WIDER Working Paper Series wp-2017-123, World Institute for Development Economic Research (UNU-WIDER).
    8. Hamdi, Helmi & Hakimi, Abdelaziz, 2015. "Corruption, FDI and Growth: All the truths of a corrupted regime before and after the social upsurge in Tunisia," MPRA Paper 63748, University Library of Munich, Germany.
    9. Hanousek, Jan & Shamshur, Anastasiya & Tresl, Jiri, 2019. "Firm efficiency, foreign ownership and CEO gender in corrupt environments," Journal of Corporate Finance, Elsevier, vol. 59(C), pages 344-360.
    10. Axel Demenet & Hoang-Anh Ho & Sarah Morcillo, 2017. "Firm-level corruption: Unravelling sand from grease," WIDER Working Paper Series 123, World Institute for Development Economic Research (UNU-WIDER).
    11. Laarni Escresa & Lucio Picci, 2020. "The determinants of cross-border corruption," Public Choice, Springer, vol. 184(3), pages 351-378, September.
    12. Antonio Bojanic, 2014. "The effect of coca and FDI on the level of corruption in Bolivia," Latin American Economic Review, Springer;Centro de Investigaciòn y Docencia Económica (CIDE), vol. 23(1), pages 1-23, December.
    13. Smriti Sharma & Saurabh Singhal & Finn Tarp, 2020. "Corruption and mental health," Working Papers 296967914, Lancaster University Management School, Economics Department.
    14. Gaygysyz Ashyrov & Helen Poltimäe, 2022. "Does Corruption Hinder Firm Energy Efficiency? Evidence From Vietnam," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 137, Faculty of Economics and Business Administration, University of Tartu (Estonia).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Eugen Dimant & Guglielmo Tosato, 2018. "Causes And Effects Of Corruption: What Has Past Decade'S Empirical Research Taught Us? A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 32(2), pages 335-356, April.
    2. Blaise Gnimassoun, Joseph Keneck Massil, 2019. "Determinants of corruption: can we put all countries in the same basket?," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 16(2), pages 239-276, December.
    3. Yan Leung Cheung & P. Raghavendra Rau & Aris Stouraitis, 2012. "How much do firms pay as bribes and what benefits do they get? Evidence from corruption cases worldwide," NBER Working Papers 17981, National Bureau of Economic Research, Inc.
    4. Yu Yan & Shusen Qi, 2021. "I Know What I Need: Optimization of Bribery," Journal of Business Ethics, Springer, vol. 174(2), pages 311-332, November.
    5. Cong Minh Huynh & Vu Hong Thai Nguyen & Hoang Bao Nguyen & Phuc Canh Nguyen, 2020. "One-way effect or multiple-way causality: foreign direct investment, institutional quality and shadow economy?," International Economics and Economic Policy, Springer, vol. 17(1), pages 219-239, February.
    6. Antonio Bojanic, 2014. "The effect of coca and FDI on the level of corruption in Bolivia," Latin American Economic Review, Springer;Centro de Investigaciòn y Docencia Económica (CIDE), vol. 23(1), pages 1-23, December.
    7. Felipe Larraín & José Tavares, 2004. "Does Foreign Direct Investment Decrease Corruption?," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 41(123), pages 217-230.
    8. Christian Bjørnskov, 2012. "Can bribes buy protection against international competition?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 148(4), pages 751-775, December.
    9. Tavares, José & Larrain B., Felipe, 2007. "Can Openness Deter Corruption? The Role of Foreign Direct Investment," CEPR Discussion Papers 6488, C.E.P.R. Discussion Papers.
    10. Jellal, Mohamed, 2014. "Firmes industrielles concurrence et corruption [Industrial firms competition and corruption]," MPRA Paper 57284, University Library of Munich, Germany.
    11. Roberto Antonietti & Jasmine Mondolo, 2018. "Does inward FDI influence the quality of domestic institutions? A cross-country panel analysis," Papers in Evolutionary Economic Geography (PEEG) 1842, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Dec 2018.
    12. Graf Lambsdorff, Johann, 2005. "Consequences and causes of corruption: What do we know from a cross-section of countries?," Passauer Diskussionspapiere, Volkswirtschaftliche Reihe V-34-05, University of Passau, Faculty of Business and Economics.
    13. Blackburn, Keith & Forgues-Puccio, Gonzalo F., 2009. "Why is corruption less harmful in some countries than in others?," Journal of Economic Behavior & Organization, Elsevier, vol. 72(3), pages 797-810, December.
    14. Keith Blackburn & Rashmi Sarmah, 2006. "Red Tape, Corruption and Finance," Economics Discussion Paper Series 0639, Economics, The University of Manchester.
    15. Schneider, Sophie Therese, 2018. "North-South trade agreements and the quality of institutions: Panel data evidence," Hohenheim Discussion Papers in Business, Economics and Social Sciences 27-2018, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    16. Keith Blackburn & Niloy Bose & M. Emranul Haque, 2011. "Public Expenditures, Bureaucratic Corruption And Economic Development," Manchester School, University of Manchester, vol. 79(3), pages 405-428, June.
    17. Bienvenido Ortega & Antonio Casquero & Jesús Sanjuán, 2016. "Corruption and Convergence in Human Development: Evidence from 69 Countries During 1990–2012," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 127(2), pages 691-719, June.
    18. M. Emranul Haque & Richard Kneller, 2007. "Business Cycle Synchronization of the Euro Area with the New and Negotiating Member Countries," Centre for Growth and Business Cycle Research Discussion Paper Series 92, Economics, The University of Manchester.

    More about this item

    Keywords

    Vietnam; FDI; Corruption; Unmatched count technique; Bribery; List question;
    All these keywords.

    JEL classification:

    • P33 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:asieco:v:23:y:2012:i:2:p:111-129. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/asieco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.