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Does 'Grease Money' Speed Up the Wheels of Commerce?

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  • Daniel Kaufmann
  • Shang-Jin Wei

Abstract

In a general equilibrium in which bribe-extracting bureaucrats can endogenously choose regulatory burden and delay, the effective (not just nominal) red tape and bribery can be positively correlated across firms. Using data from three worldwide firm surveys, this paper finds evidence consistent with this hypothesis. Firms that pay more in bribes are also likely to spend more, not less, management time with bureaucrats in negotiating regulations. They also face a higher, not lower, cost of capital.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 00/64.

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Length: 21
Date of creation: 01 Mar 2000
Date of revision:
Handle: RePEc:imf:imfwpa:00/64

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Keywords: Economic models; bribery; survey; surveys; correlation; standard deviation; predictability; business transactions; arithmetic; samples; scatter plot; prediction; statistics; constant term; international business; correlations;

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  1. Shang-Jin Wei, 1997. "How Taxing is Corruption on International Investors?," NBER Working Papers 6030, National Bureau of Economic Research, Inc.
  2. Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, American Economic Association, vol. 64(3), pages 291-303, June.
  3. Bliss, Christopher & Di Tella, Rafael, 1997. "Does Competition Kill Corruption?," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 105(5), pages 1001-23, October.
  4. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 35(3), pages 1320-1346, September.
  5. Banerjee, Abhijit V, 1997. "A Theory of Misgovernance," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 112(4), pages 1289-1332, November.
  6. Rose-Ackerman, Susan, 1975. "The economics of corruption," Journal of Public Economics, Elsevier, Elsevier, vol. 4(2), pages 187-203, February.
  7. Shleifer, Andrei & Vishny, Robert W, 1994. "Politicians and Firms," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 109(4), pages 995-1025, November.
  8. Vito Tanzi, 1998. "Corruption Around the World: Causes, Consequences, Scope, and Cures," IMF Staff Papers, Palgrave Macmillan, vol. 45(4), pages 559-594, December.
  9. Banerjee, A.V., 1997. "A Theory of Misgovernance," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 97-4, Massachusetts Institute of Technology (MIT), Department of Economics.
  10. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 110(3), pages 681-712, August.
  11. Ades, Alberto & Di Tella, Rafael, 1997. "National Champions and Corruption: Some Unpleasant Interventionist Arithmetic," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 107(443), pages 1023-42, July.
  12. Lui, Francis T, 1985. "An Equilibrium Queuing Model of Bribery," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 93(4), pages 760-81, August.
  13. Shang-Jin Wei, 1997. "Why is Corruption So Much More Taxing Than Tax? Arbitrariness Kills," NBER Working Papers 6255, National Bureau of Economic Research, Inc.
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