Access to land and permits: Firm-level evidence of impediments to development in transition countries

I examine how limited access to land and obstacles in gaining business licensing and permits are cited by businesses in transition economies as substantial impediments, feeding into cultures of bribery and corruption and impeding economic development. A theoretical model of limited access to land and permits is presented motivating empirical modeling. Using the EBRD-World Bank BEEPS V survey data for firms in transition economies, both country and firm-specific characteristics are used to explain the reported obstacles and requests for informal payments, or bribes, by government officials. Probit models of reported obstacles, models of the severity of those obstacles, and models of bribe requests by officials are estimated. To account for endogeneity, instrumental variable (IV) models are estimated explaining how predicted land access or permit obstacles influence the likelihood of firms reporting bribes paid to government officials to overcome those obstacles. Results indicate that government restrictions limiting access to land and permits have significant effects on the subjective views of firms. Both country and firm-specific characteristics influence firm responses. Limited access to land and/or business licensing and permits creates an environment in which firms report that they are much more likely to be asked to make informal payments, gifts, or bribes, to get things done.