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Social networks and bribery: The case of entrepreneurs in Eastern Europe

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  • Chavis, Larry
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    Abstract

    Using a survey of new firms in Poland, Romania, and Slovakia, I explore how an entrepreneur’s social networks affect the amount paid in bribes to government officials. Lower levels of bribe payments are associated with ownership by a former manager of a state-owned enterprise (SOE), with being a spin-off from a SOE, and with trade association membership. The results also suggest that these networks have a larger impact on bribe payments than do firm characteristics such as profits, sales, or resale value. For the average firm, having a former SOE manager as an owner can be expected to reduce bribe payments by over 50%, while, by contrast, doubling the firm’s profits results in only a 7% increase in bribe payments.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Comparative Economics.

    Volume (Year): 41 (2013)
    Issue (Month): 1 ()
    Pages: 279-293

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    Handle: RePEc:eee:jcecon:v:41:y:2013:i:1:p:279-293

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    Web page: http://www.elsevier.com/locate/inca/622864

    Related research

    Keywords: Corruption; Transition economies; Social networks; Property rights;

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    References

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    1. Clarke, George R. G. & Xu, Lixin Colin, 2004. "Privatization, competition, and corruption: how characteristics of bribe takers and payers affect bribes to utilities," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 2067-2097, August.
    2. Anand V. Swamy & Stephen Knack & Young Lee & Omar Azfar, 2000. "Gender and Corruption," Department of Economics Working Papers 2000-10, Department of Economics, Williams College.
    3. Johnson, Simon & McMillan, John & Woodruff, Christopher, 1999. "Why do Firms Hide? Bribes and Unofficial Activity After Communism," CEPR Discussion Papers 2105, C.E.P.R. Discussion Papers.
    4. Simon Johnson & John McMillan & Christopher Woodruff, 2002. "Property Rights and Finance," NBER Working Papers 8852, National Bureau of Economic Research, Inc.
    5. Hunt, Jennifer, 2004. "Trust and Bribery: The Role of the Quid Pro Quo and the Link With Crime," CEPR Discussion Papers 4567, C.E.P.R. Discussion Papers.
    6. David Lipton & Jeffrey Sachs, 1990. "Privitization in Eastern Europe: The Case of Poland," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(2), pages 293-342.
    7. Hellman, Joel S. & Jones, Geraint & Kaufmann, Daniel, 2003. "Seize the state, seize the day: state capture and influence in transition economies," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 751-773, December.
    8. Fisman, Raymond & Svensson, Jakob, 2000. "Are corruption and taxation really harmful to growth? - firm-level evidence," Policy Research Working Paper Series 2485, The World Bank.
    9. Jakob Svensson, 2003. "Who Must Pay Bribes And How Much? Evidence From A Cross Section Of Firms," The Quarterly Journal of Economics, MIT Press, vol. 118(1), pages 207-230, February.
    10. David Lipton & Jeffrey D. Sachs, 1990. "Creating a Market Economy in Eastern Europe: The Case of Poland," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(1), pages 75-148.
    11. Safavian, Mehnaz S. & Graham, Douglas H. & Gonzalez-Vega, Claudio, 2001. "Corruption and Microenterprises in Russia," World Development, Elsevier, vol. 29(7), pages 1215-1224, July.
    12. William Pyle, 2011. "Organized Business, Political Competition, and Property Rights: Evidence from the Russian Federation," Journal of Law, Economics and Organization, Oxford University Press, vol. 27(1), pages 2-31.
    13. John McMillan, 1990. "The Economics Of Section 301: A Game-Theoretic Guide," Economics and Politics, Wiley Blackwell, vol. 2(1), pages 45-57, 03.
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