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Why Do Firms Hide? Bribes and Unofficial Activity after Communism

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Author Info

  • Simon Johnson

    (Sloan School of Management, MIT)

  • Daniel Kaufmann

    (The World Bank)

  • John McMillan

    (Stanford University)

  • Christopher Woodruff

    (Univeristy of California San Diego)

Abstract

Our survey of private manufacturing firms finds the size of hidden ‘unofficial’ activity to be much larger in Russia and Ukraine than in Poland, Slovakia and Romania. A comparison of cross-country averages shows that managers in Russia and Ukraine face higher effective tax rates, worse bureaucratic corruption, greater incidence of mafia protection, and have less faith in the court system. Our firm-level regressions for the three Eastern European countries find that bureaucratic corruption is significantly associated with hiding output. Ó 2000 Elsevier Science S.A. All rights reserved.

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Bibliographic Info

Paper provided by EconWPA in its series Public Economics with number 0308004.

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Length: 26 pages
Date of creation: 25 Aug 2003
Date of revision:
Handle: RePEc:wpa:wuwppe:0308004

Note: Type of Document - Acrobat PDF; pages: 26 ; figures: included
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Web page: http://128.118.178.162

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  1. Maria Lacko, 1999. "Do Power Consumption Data Tell the Story? - Electricity Intensity and Hidden Economy in Post-Socialist Countries," Budapest Working Papers on the Labour Market 9902, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  2. Marcouiller, Douglas & Young, Leslie, 1995. "The Black Hole of Graft: The Predatory State and the Informal Economy," American Economic Review, American Economic Association, vol. 85(3), pages 630-46, June.
  3. Shleifer, Andrei & Vishny, Robert W, 1994. "Politicians and Firms," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 995-1025, November.
  4. Johnson, Simon & McMillan, John & Woodruff, Christopher, 1999. "Contract Enforcement in Transition," CEPR Discussion Papers 2081, C.E.P.R. Discussion Papers.
  5. Timothy Frye & Andrei Shleifer, 1996. "The Invisible Hand and the Grabbing Hand," NBER Working Papers 5856, National Bureau of Economic Research, Inc.
  6. Loayza, Norman A., 1997. "The economics of the informal sector : a simple model and some empirical evidence from Latin America," Policy Research Working Paper Series 1727, The World Bank.
  7. Simon Johnson & Daniel Kaufman & Andrei Shleifer, 1997. "The Unofficial Economy in Transition," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(2), pages 159-240.
  8. Andrei Shleifer, 1996. "Government in Transition," Harvard Institute of Economic Research Working Papers 1783, Harvard - Institute of Economic Research.
  9. repec:att:wimass:9610 is not listed on IDEAS
  10. Johnson, Simon & Kaufmann, Daniel & Zoido-Lobaton, Pablo, 1998. "Regulatory Discretion and the Unofficial Economy," American Economic Review, American Economic Association, vol. 88(2), pages 387-92, May.
  11. James Andreoni & Brian Erard & Jonathan Feinstein, 1998. "Tax Compliance," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 818-860, June.
  12. Enste, Dominik & Schneider, Friedrich, 1998. "Increasing Shadow Economies all over the World - Fiction or Reality?," IZA Discussion Papers 26, Institute for the Study of Labor (IZA).
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