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Corruption and Firm Performance in Africa

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Author Info

  • 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 “local”) level, companies that pay bribes have 20 percent lower levels of output per worker. At the economy-wide ( or “global”) 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/0409/0409050.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Development and Comp Systems with number 0409050.

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Length: 32 pages
Date of creation: 28 Sep 2004
Date of revision:
Handle: RePEc:wpa:wuwpdc:0409050

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

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  1. Daniel Kaufmann & Shang-Jin Wei, 1999. "Does "Grease Money" Speed Up the Wheels of Commerce?," NBER Working Papers 7093, National Bureau of Economic Research, Inc.
  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. 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.
  6. Barro, R.J., 1989. "Economic Growth In A Cross Section Of Countries," RCER Working Papers 201, University of Rochester - Center for Economic Research (RCER).
  7. Jan Willem Gunning & Paul Collier, 1999. "Explaining African Economic Performance," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 64-111, March.
  8. 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.
  9. Shang-Jin Wei, 2000. "How Taxing is Corruption on International Investors?," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 1-11, February.
  10. Bliss, Christopher & Di Tella, Rafael, 1997. "Does Competition Kill Corruption?," Journal of Political Economy, University of Chicago Press, vol. 105(5), pages 1001-23, October.
  11. Shang-Jin Wei & Yi Wu, 2002. "Negative Alchemy? Corruption, Composition of Capital Flows, and Currency Crises," NBER Chapters, in: Preventing Currency Crises in Emerging Markets, pages 461-506 National Bureau of Economic Research, Inc.
  12. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
  13. 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.
  14. Jeffrey Sachs & Andrew Warner, 1995. "Economic Reform and the Progress of Global Integration," Harvard Institute of Economic Research Working Papers 1733, Harvard - Institute of Economic Research.
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Cited by:
  1. Humphry Hung, 2008. "Normalized Collective Corruption in a Transitional Economy: Small Treasuries in Large Chinese Enterprises," Journal of Business Ethics, Springer, vol. 79(1), pages 69-83, April.
  2. Vial, Virginie & Hanoteau, Julien, 2010. "Corruption, Manufacturing Plant Growth, and the Asian Paradox: Indonesian Evidence," World Development, Elsevier, vol. 38(5), pages 693-705, May.
  3. 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 200802, University of Kansas, Department of Economics.

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