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Corruption and firm performance in Africa

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  • John McArthur
  • Francis Teal

Abstract

This paper uses survey data to investigate empirically the importance of corruption in determining firm performance in Africa. We allow for the possibility of perception bias on the part of the respondents and for corruption being endogenous. We find that corruption is linked to significant adverse effects on firm performance in two ways. At the firm (or “local”) level, companies that pay bribes have 20 percent lower levels of output per worker. At the economy-wide (or “global”) level, firms in countries with pervasive corruption are some 70 per cent less efficient than firms in countries free of corruption. We thus provide evidence that competitive uncoordinated local corruption has substantial global effects.

Suggested Citation

  • John McArthur & Francis Teal, 2002. "Corruption and firm performance in Africa," CSAE Working Paper Series 2002-10, Centre for the Study of African Economies, University of Oxford.
  • Handle: RePEc:csa:wpaper:2002-10
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    JEL classification:

    • O - Economic Development, Innovation, Technological Change, and Growth
    • P - Political Economy and Comparative Economic Systems

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