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Corruption and Firm Performance in Africa

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  • Francis Teal
  • John McArthur
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    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 “localâ€) level, companies that pay bribes have 20 percent lower levels of output per worker. At the economywide (or “globalâ€) 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.

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    File URL: http://www.csae.ox.ac.uk/workingpapers/pdfs/2002-10text.pdf
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    Bibliographic Info

    Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number WPS/2002-10.

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    Date of creation: 01 Dec 2002
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    Handle: RePEc:oxf:wpaper:wps/2002-10

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    1. Barro, R.J., 1989. "Economic Growth In A Cross Section Of Countries," RCER Working Papers 201, University of Rochester - Center for Economic Research (RCER).
    2. Easterly, W & Levine, R, 1996. "Africa's Growth Tragedy : Policies and Ethnic Divisions," Papers 536, Harvard - Institute for International Development.
    3. Nickell, S.J., 1993. "Competition and Crporate Performance," Economics Series Working Papers 99155, University of Oxford, Department of Economics.
    4. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
    5. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output Per Worker Than Others?," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 83-116, February.
    6. Friedman, Eric & Johnson, Simon & Kaufmann, Daniel & Zoido-Lobaton, Pablo, 2000. "Dodging the grabbing hand: the determinants of unofficial activity in 69 countries," Journal of Public Economics, Elsevier, vol. 76(3), pages 459-493, June.
    7. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
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