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Corruption and Productivity Firm-level Evidence from the BEEPS Survey

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  • Donato De Rosa
  • Nishaal Gooroochurn
  • Holger Görg

Abstract

Using enterprise data for the economies of Central and Eastern Europe and the CIS, this study examines the effects of corruption on productivity. Corruption is defined as a “bribe tax” and is compared to another form of institutional inefficiency, which is often believed to be closely linked with corruption: the “time tax” imposed on firms by red tape. When testing their effects in the full sample, only the bribe tax appears to have a negative effect on firm-level productivity, while the effect of the time tax is insignificant. At the same time, there is no evidence of a trade-off between the time and the bribe taxes, implying that bribing does not emerge as a second-best option to achieve higher productivity by helping circumvent cumbersome bureaucratic requirements. When the sample is split between EU and non-EU countries, the time tax turns out to have a negative effect only in EU countries and the bribe tax only in non-EU countries. This suggests that the institutional environment influences the way in which firm behaviour affects firm performance. In particular, the impact of bribing for individual firms appears to vary depending on overall institutional quality: in countries where corruption is more prevalent and the legal framework is weaker, bribery is more harmful for firm-level productivity

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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1632.

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Length: 44 pages
Date of creation: Jun 2010
Date of revision:
Handle: RePEc:kie:kieliw:1632

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Keywords: Keywords: corruption; firm performance; productivity; bribe tax;

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Citations

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Cited by:
  1. Jiang, Ting & Nie, Huihua, 2014. "The stained China miracle: Corruption, regulation, and firm performance," Economics Letters, Elsevier, vol. 123(3), pages 366-369.
  2. Asongu Simplice & Oasis Kodila-Tedika, 2013. "Crime and conflicts in Africa: consequences of corruption?," Working Papers 13/004, African Governance and Development Institute..
  3. Kodila Tedika, Oasis, 2012. "Consequences De La Corruption : Panorama Empirique
    [Consequences of Corruption : Empirical survey]
    ," MPRA Paper 41482, University Library of Munich, Germany.
  4. Léonce Ndikumana, 2013. "The Private Sector as Culprit and Victim of Corruption in Africa," Working Papers wp330, Political Economy Research Institute, University of Massachusetts at Amherst.
  5. A. Lasagni & A. Nifo & G. Vecchione, 2012. "Firm productivity and institutional quality. Evidence from Italian industry," Economics Department Working Papers 2012-EP07, Department of Economics, Parma University (Italy).
  6. Lau, Chi Keung Marco & Demir, Ender & Bilgin, Mehmet Huseyin, 2013. "Experience-based corporate corruption and stock market volatility: Evidence from emerging markets," Emerging Markets Review, Elsevier, vol. 17(C), pages 1-13.
  7. Anna Kochanova, 2012. "The Impact of Bribery on Firm Performance: Evidence from Central and Eastern European Countries," CERGE-EI Working Papers wp473, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  8. Asongu Simplice & Oasis Kodila-Tedika, 2013. "Fighting African Conflicts and Crimes: Which Governance Tools Matter?," Working Papers 13/007, African Governance and Development Institute..
  9. Fungácová , Zuzana & Kochanova, Anna & Weill, Laurent, 2014. "Does money buy credit? Firm-level evidence on bribery and bank debt," BOFIT Discussion Papers 4/2014, Bank of Finland, Institute for Economies in Transition.

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