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Corruption, Manufacturing Plant Growth, and the Asian Paradox: Indonesian Evidence

Listed author(s):
  • Vial, Virginie
  • Hanoteau, Julien

Summary Using panel data from the Indonesian manufacturing industry during the Suharto era (1975-95), we assess the impact of plant-level corruption on output and productivity growth. In support of the "grease the wheels" hypothesis and the view of an Asian paradox, we find that corruption, measured as bribes and indirect tax payments, has a positive and statistically significant effect on individual plant growth. This effect persists over the entire period, which suggests improvements in the efficacy of the bribe system and a strengthening of the long-term contract between firms and the government.

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File URL: http://www.sciencedirect.com/science/article/pii/S0305-750X(09)00220-4
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Article provided by Elsevier in its journal World Development.

Volume (Year): 38 (2010)
Issue (Month): 5 (May)
Pages: 693-705

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Handle: RePEc:eee:wdevel:v:38:y:2010:i:5:p:693-705
Contact details of provider: Web page: http://www.elsevier.com/locate/worlddev

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  1. Jakob Svensson, 2003. "Who Must Pay Bribes and How Much? Evidence from a Cross Section of Firms," The Quarterly Journal of Economics, Oxford University Press, vol. 118(1), pages 207-230.
  2. 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.
  3. de Wit, Gerrit, 2005. "Firm size distributions: An overview of steady-state distributions resulting from firm dynamics models," International Journal of Industrial Organization, Elsevier, vol. 23(5-6), pages 423-450, June.
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  7. Ari Kuncoro, 2004. "Bribery in Indonesia: some evidence from micro-level data," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 40(3), pages 329-354.
  8. Sjoholm, Fredrik, 1999. "Exports, Imports and Productivity: Results from Indonesian Establishment Data," World Development, Elsevier, vol. 27(4), pages 705-715, April.
  9. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2007. "Enhanced routines for instrumental variables/GMM estimation and testing," Boston College Working Papers in Economics 667, Boston College Department of Economics, revised 05 Sep 2007.
  10. Rock, Michael T. & Bonnett, Heidi, 2004. "The Comparative Politics of Corruption: Accounting for the East Asian Paradox in Empirical Studies of Corruption, Growth and Investment," World Development, Elsevier, vol. 32(6), pages 999-1017, June.
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  22. Fisman, Raymond & Svensson, Jakob, 2007. "Are corruption and taxation really harmful to growth? Firm level evidence," Journal of Development Economics, Elsevier, vol. 83(1), pages 63-75, May.
  23. 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.
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