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Corruption and Market Competition: Evidence from Post-Communist Countries

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  • Diaby, Aboubacar
  • Sylwester, Kevin

Abstract

This paper empirically examines whether market competition is associated with greater bribe payments. We use firm-level data from the Business Environment and Enterprise Performance Surveys. Since market competition could be endogenous and some firms report zero bribes, we employ a tobit estimation methodology instrumenting for market competition. We find that greater market competition increases the amount of bribes paid. Results are robust across several measures of market competition. However, market competition is less strongly associated with bribes in the presence of other obstacles of doing business that could also lead to more bribes.

Suggested Citation

  • Diaby, Aboubacar & Sylwester, Kevin, 2015. "Corruption and Market Competition: Evidence from Post-Communist Countries," World Development, Elsevier, vol. 66(C), pages 487-499.
    • Handle: RePEc:eee:wdevel:v:66:y:2015:i:c:p:487-499
    DOI: 10.1016/j.worlddev.2014.09.003
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    4. Michael Breen & Robert Gillanders & Gemma Mcnulty & Akisato Suzuki, 2017. "Gender and Corruption in Business," Journal of Development Studies, Taylor & Francis Journals, vol. 53(9), pages 1486-1501, September.
    5. Susana Gago-Rodríguez & Gilberto Márquez-Illescas & Manuel Núñez-Nickel, 2020. "Denial of Corruption: Voluntary Disclosure of Bribery Information," Journal of Business Ethics, Springer, vol. 162(3), pages 609-626, March.
    6. Joël CARIOLLE, 2016. "The voracity and scarcity effects of export booms and busts on bribery," Working Papers P146, FERDI.
    7. Malesky, Edmund J. & Nguyen, Thang V. & Bach, Thang N. & Ho, Bao D., 2020. "The effect of market competition on bribery in emerging economies: An empirical analysis of Vietnamese firms," World Development, Elsevier, vol. 131(C).
    8. Asteriou, Dimitrios & Pilbeam, Keith & Tomuleasa, Iuliana, 2021. "The impact of corruption, economic freedom, regulation and transparency on bank profitability and bank stability: Evidence from the Eurozone area," Journal of Economic Behavior & Organization, Elsevier, vol. 184(C), pages 150-177.
    9. Ficawoyi Donou‐Adonsou & Gyan Pradhan & Hem C. Basnet, 2022. "Firm‐level aggregate corruption and competition: The role of telecommunications infrastructure," Review of Policy Research, Policy Studies Organization, vol. 39(2), pages 199-218, March.
    10. El Ghoul, Sadok & Guedhami, Omrane & Wei, Zuobao & Zhu, Yicheng, 2023. "Does public corruption affect analyst forecast quality?," Journal of Banking & Finance, Elsevier, vol. 154(C).
    11. Kanti Pertiwi, 2018. "Contextualizing Corruption: A Cross-Disciplinary Approach to Studying Corruption in Organizations," Administrative Sciences, MDPI, vol. 8(2), pages 1-19, April.
    12. Shuichiro Nishioka & Sumi Sharma & Tuan Le, 2023. "Political Regimes and Firms' Decisions to Pay Bribes: Theory and Evidence from Firm-level Surveys," Working Papers 23-04, Department of Economics, West Virginia University.
    13. Jetter, Michael & Agudelo, Alejandra Montoya & Hassan, Andrés Ramírez, 2015. "The Effect of Democracy on Corruption: Income is Key," World Development, Elsevier, vol. 74(C), pages 286-304.
    14. Hongkang Xu & Mai Dao & Jia Wu, 2019. "The effect of local political corruption on earnings quality," Review of Quantitative Finance and Accounting, Springer, vol. 53(2), pages 551-574, August.
    15. Abbas Khandan, 2022. "Externalities in the rent-seeking strategies of lobbying and bribery," Public Sector Economics, Institute of Public Finance, vol. 46(3), pages 421-450.
    16. Dimitrios Varvarigos & Eleni Stathopoulou, 2023. "On the relation between corruption and market competition," Economic Inquiry, Western Economic Association International, vol. 61(1), pages 99-121, January.
    17. Massimo Finocchiaro Castro & Calogero Guccio & Giacomo Pignataro & Ilde Rizzo, 2018. "Is competition able to counteract the inefficiency of corruption? The case of Italian public works," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 45(1), pages 55-84, March.
    18. Ha, Le Thanh & Thanh, To Trung & Thang, Doan Ngoc & Anh, Pham Thi Hoang, 2021. "Bribery, export decisions, and institutional constraints: Evidence from cross-country firm-level data," Economic Analysis and Policy, Elsevier, vol. 69(C), pages 585-612.
    19. Bassetti, Thomas & Dal Maso, Lorenzo & Lattanzi, Nicola, 2015. "Family businesses in Eastern European countries: How informal payments affect exports," Journal of Family Business Strategy, Elsevier, vol. 6(4), pages 219-233.
    20. Golovanova, Svetlana V. (Голованова, Светлана) & Meleshkina, Anna I. (Мелешкина, Анна), 2016. "Estimation of Interrelation between Corruption and Competition [Оценка Взаимного Влияния Коррупции И Конкуренции]," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 6, pages 100-121, December.
    21. Michael Breen & Robert Gillanders, 2020. "Press Freedom and Corruption Perceptions: Is There a Reputational Premium?," Politics and Governance, Cogitatio Press, vol. 8(2), pages 103-115.
    22. Hamaguchi, Yoshihiro, 2023. "Environmental tax evasion as a determinant of the Porter and pollution haven hypotheses in a corrupt political system," Economic Analysis and Policy, Elsevier, vol. 79(C), pages 610-633.
    23. Thang V. Nguyen & Minh H. Doan & Nhung H. Tran, 2021. "The perpetuation of bribery–prone relationships: A study from Vietnamese public officials," Public Administration & Development, Blackwell Publishing, vol. 41(5), pages 244-256, December.
    24. Pavlova, Natalia (Павлова, Наталья) & Meleshkina, Anna (Мелешкина, Анна), 2017. "Anti-Corruption and Protection of Competition [Противодействие Коррупции И Защита Конкуренции]," Working Papers 041707, Russian Presidential Academy of National Economy and Public Administration.

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