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Predictable Corruption and Firm Investment: Evidence from a Natural Experiment and Survey of Cambodian Entrepreneurs


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  • Malesky, Edmund J.
  • Samphantharak, Krislert
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    This paper utilizes a unique dataset of 500 firms in ten Cambodian provinces and a natural experiment to test a long-held convention in political economy that the predictability of a corruption is at least as important for firm investment decisions as the amount of bribes a firm must pay, provided the bribes are not prohibitively expensive. Our results suggest that this hypothesis is correct. Firms exposed to a shock to their bribe schedules by a change in governor invest significantly less in subsequent periods, as they wait for new information about their new chief executive. Furthermore, the amount of corruption (both measured by survey data and proxied by the number of commercial sex workers) is significantly lower in provinces with new governors. Our findings are robust to a battery of firm-level controls and province-level investment climate measures.

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    Bibliographic Info

    Article provided by now publishers in its journal International Quarterly Journal of Political Science.

    Volume (Year): 3 (2008)
    Issue (Month): 3 (October)
    Pages: 227-267

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    Handle: RePEc:now:jlqjps:100.00008013

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    Cited by:
    1. Ahmed, Faisal Z. & Greenleaf, Anne & Sacks, Audrey, 2014. "The Paradox of Export Growth in Areas of Weak Governance: The Case of the Ready Made Garment Sector in Bangladesh," World Development, Elsevier, vol. 56(C), pages 258-271.
    2. Benjamin A. Olken & Rohini Pande, 2011. "Corruption in Developing Countries," NBER Working Papers 17398, National Bureau of Economic Research, Inc.
    3. Jensen, Nathan M & Rahman, Aminur, 2011. "The silence of corruption : identifying underreporting of business corruption through randomized response techniques," Policy Research Working Paper Series 5696, The World Bank.


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