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Corruption and Firm Performance in Africa

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  • John McArthur

    (Centre for the Study of African Economies)

  • Francis Teal

    (Centre for the Study of African Economies)

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 ^Slocal^T) level, companies that pay bribes have 20 percent lower levels of output per worker. At the economywide (or ^Sglobal^T) 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://128.118.178.162/eps/dev/papers/0409/0409015.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Development and Comp Systems with number 0409015.

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Length: 32 pages
Date of creation: 15 Sep 2004
Date of revision:
Handle: RePEc:wpa:wuwpdc:0409015

Note: Type of Document - pdf; pages: 32
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Web page: http://128.118.178.162

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  1. Daron Acemoglu & Simon Johnson & James A. Robinson, 2000. "The Colonial Origins of Comparative Development: An Empirical Investigation," NBER Working Papers 7771, National Bureau of Economic Research, Inc.
  2. Shang-Jin Wei, 1997. "How Taxing is Corruption on International Investors?," NBER Working Papers 6030, National Bureau of Economic Research, Inc.
  3. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780195060119, October.
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  6. Paul Collier & Jan Willem Gunning, 1998. "Explaining African economic performance," Economics Series Working Papers, University of Oxford, Department of Economics WPS/1997-02.2, University of Oxford, Department of Economics.
  7. Nickell, Stephen J, 1996. "Competition and Corporate Performance," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 104(4), pages 724-46, August.
  8. Barro, Robert J, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 106(2), pages 407-43, May.
  9. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
  10. Shang-Jin Wei & Yi Wu, 2001. "Negative Alchemy? Corruption, Composition of Capital Flows, and Currency Crises," NBER Working Papers 8187, National Bureau of Economic Research, Inc.
  11. Easterly, William & Levine, Ross, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 112(4), pages 1203-50, November.
  12. 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, Elsevier, vol. 76(3), pages 459-493, June.
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Cited by:
  1. Julien Hanoteau & Virginie Vial, 2014. "Grease or sand the wheel? The effects of individual bribe payments on aggregate productivity growth," EcoMod2014, EcoMod 6685, EcoMod.
  2. Humphry Hung, 2008. "Normalized Collective Corruption in a Transitional Economy: Small Treasuries in Large Chinese Enterprises," Journal of Business Ethics, Springer, Springer, vol. 79(1), pages 69-83, April.
  3. Vial, Virginie & Hanoteau, Julien, 2010. "Corruption, Manufacturing Plant Growth, and the Asian Paradox: Indonesian Evidence," World Development, Elsevier, Elsevier, vol. 38(5), pages 693-705, May.
  4. Elizabeth Asiedu & James Freeman, 2008. "The Effect of Corruption on Investment Growth: Evidence from Firms in Latin America, Sub-Saharan Africa and Transition Countries," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS, University of Kansas, Department of Economics 200802, University of Kansas, Department of Economics.

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