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Bribery in Indonesia: some evidence from micro-level data

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  • Ari Kuncoro

Abstract

This paper outlines and tests a model in which firms seek to reduce the cost of taxes and regulatory compliance by offering bribes to government officials. It finds that firms' profitability (scaled by production costs) largely determines both the amounts paid and the time spent negotiating bribes with officials. Competition between arms of the bureaucracy for bribe income seems to be a result of decentralisation, but the analysis suggests that this competition would lead to a spreading of bribes among a larger number of officials rather than to a significant increase in their total amount. Local governments may be able to raise more revenue by reducing the number of taxes and regulations and using part of the increased revenue to raise the salaries of officials, while devoting more effort to restraining corrupt behaviour. But progress may be blocked by central government tax officials increasing their demands for bribes.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Bulletin of Indonesian Economic Studies.

Volume (Year): 40 (2004)
Issue (Month): 3 ()
Pages: 329-354

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Handle: RePEc:taf:bindes:v:40:y:2004:i:3:p:329-354

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Cited by:
  1. Matsumoto, Makiko & Verick, Sher, 2011. "Employment trends in Indonesia over 1996-2009 : casualization of the labour market during an era of crises, reforms and recovery," ILO Working Papers 466252, International Labour Organization.
  2. Dendi Ramdani & Arjen Witteloostuijn, 2012. "The Shareholder–Manager Relationship and Its Impact on the Likelihood of Firm Bribery," Journal of Business Ethics, Springer, vol. 108(4), pages 495-507, July.
  3. Blane Lewis, 2006. "Local government taxation: An analysis of administrative cost inefficiency," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 42(2), pages 213-233.
  4. Freille, Sebastian & Haque, Mohammad Emranul & Kneller, Richard Anthony, 2007. "Federalism, decentralisation and corruption," MPRA Paper 27535, University Library of Munich, Germany.
  5. Vial, Virginie & Hanoteau, Julien, 2010. "Corruption, Manufacturing Plant Growth, and the Asian Paradox: Indonesian Evidence," World Development, Elsevier, vol. 38(5), pages 693-705, May.
  6. Ross Mcleod, 2005. "The struggle to regain effective government under democracy in Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 41(3), pages 367-386.

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