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Corruption and entrepreneurship: evidence from Brazilian municipalities

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  • Jamie Bologna
  • Amanda Ross

Abstract

We estimate the effect of corruption on business activity in Brazilian municipalities. We employ a new measure of corruption based on data from random audits of municipal governments. Our results suggest that higher levels of corruption are generally associated with reductions in the number of business establishments. Furthermore, we find that these effects become larger over time, suggesting that corruption is particularly detrimental over the long-run. However, we also find that the effect of corruption on business activity can be insignificant or even positive conditional on institutional quality being very poor. This is consistent with the “grease the wheels” hypothesis, which argues that corruption provides entrepreneurs with means to avoid burdensome regulations and taxes. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Jamie Bologna & Amanda Ross, 2015. "Corruption and entrepreneurship: evidence from Brazilian municipalities," Public Choice, Springer, vol. 165(1), pages 59-77, October.
    • Handle: RePEc:kap:pubcho:v:165:y:2015:i:1:p:59-77
    DOI: 10.1007/s11127-015-0292-5
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    More about this item

    Keywords

    Entrepreneurship; Corruption; Institutions; R1; R5;
    All these keywords.

    JEL classification:

    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics
    • R5 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis

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