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Heard melodies are sweet, but those unheard are sweeter : understanding corruption using cross-national firm-level surveys

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  • Jensen, Nathan M.
  • Li, Quan
  • Rahman, Aminur

Abstract

Since the early 1990s, a large number of studies have been undertaken to understand the causes and consequences of corruption. Many of these studies have employed firm-level survey data from various countries. While insightful, these analyses based on firm-level surveys have largely ignored two important potential problems: nonresponse and false response by the firms. Treating firms'responses on a sensitive issue like corruption at their face value could produce incorrect inferences and erroneous policy recommendations. We argue that the data generation of nonresponse and false response is a function of the political environment in which the firms operate. In a politically repressive environment, firms use nonresponse and false response as self-protection mechanisms. Corruption is understated as a result. We test our arguments using the World Bank enterprise survey data of more than 44,000 firms in 72 countries for the period 2000-2005 and find that firms in countries with less press freedom are more likely to provide nonresponse or false response on the issue of corruption. Therefore, ignoring this systematic bias in firms'responses could result in underestimation of the severity of corruption in politically repressive countries. More important, this bias is a rich and underutilized source of information on the political constraints faced by the firms. Nonresponse and false response, like unheard melodies, could be more informative than the heard melodies in the available truthful responses in firm surveys.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4413.

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Date of creation: 01 Nov 2007
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Handle: RePEc:wbk:wbrwps:4413

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Keywords: Public Sector Corruption&Anticorruption Measures; Microfinance; Access to Finance; Poverty Monitoring&Analysis; Social Accountability;

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References

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  2. Regina Riphahn & Oliver Serfling, 2005. "Item non-response on income and wealth questions," Empirical Economics, Springer, vol. 30(2), pages 521-538, 09.
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  8. Roberta Gatti, 2004. "Explaining corruption: are open countries less corrupt?," Journal of International Development, John Wiley & Sons, Ltd., vol. 16(6), pages 851-861.
  9. Gilbert,Christopher L. & Vines,David (ed.), 2000. "The World Bank," Cambridge Books, Cambridge University Press, number 9780521790956, April.
  10. Raymond Fisman & Edward Miguel, 2006. "Cultures of Corruption: Evidence From Diplomatic Parking Tickets," NBER Working Papers 12312, National Bureau of Economic Research, Inc.
  11. Recanatini, Francesca & Wallsten, Scott J. & Lixin Colin Xu, 2000. "Surveying surveys and questioning questions - learning from World Bank experience," Policy Research Working Paper Series 2307, The World Bank.
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  14. Holmes, Thomas J & Schmitz, James A, Jr, 1996. "Nonresponse Bias and Business Turnover Rates: The Case of the Characteristics of Business Owners Survey," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(2), pages 231-41, April.
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Cited by:
  1. Clarke George R, 2011. "Are Managers' Perceptions of Constraints to Growth Reliable? Evidence from a Natural Experiment in South Africa," Journal of Globalization and Development, De Gruyter, vol. 2(1), pages 1-28, August.
  2. Clarke, George R.G., 2011. "How Petty is Petty Corruption? Evidence from Firm Surveys in Africa," World Development, Elsevier, vol. 39(7), pages 1122-1132, July.
  3. World Bank, 2011. "Republic of Tajikistan - Country Economic Memorandum : Tajikistan’s Quest for Growth: Stimulating Private Investment," World Bank Other Operational Studies 2761, The World Bank.
  4. Alexeev, Michael & Song, Yunah, 2013. "Corruption and product market competition: An empirical investigation," Journal of Development Economics, Elsevier, vol. 103(C), pages 154-166.
  5. Jelena Budak & Edo Rajh, 2012. "Corruption Survey in Croatia: Survey Confidentiality and Trust in Institutions," Working Papers 1201, The Institute of Economics, Zagreb.

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