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The Impact of the Foreign Corrupt Practices Act on Competitiveness, Bribery, and Investment

Author

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  • Maria Arbatskaya
  • Hugo M Mialon

Abstract

The Foreign Corrupt Practices Act (FCPA) prohibits U.S.-related firms from making bribes abroad. We analyze the FCPA’s effects in a model of competition between a U.S. and foreign firm for contracts in a host country. If the FCPA only applies to the U.S. firm, it reduces that firm’s competitiveness and either increases bribery by the foreign firm or reduces overall investment. If the FCPA also applies to foreign firms, it reduces total bribery, and in host countries with high corruption levels, it increases total investment. The model suggests that the FCPA will deter bribery and stimulate investment while not disadvantaging U.S. firms if its enforcement is aimed at firms who engaged in bribery in highly corrupt countries and whose main competitors are also subject to the FCPA.

Suggested Citation

  • Maria Arbatskaya & Hugo M Mialon, 2020. "The Impact of the Foreign Corrupt Practices Act on Competitiveness, Bribery, and Investment," American Law and Economics Review, American Law and Economics Association, vol. 22(1), pages 105-126.
    • Handle: RePEc:oup:amlawe:v:22:y:2020:i:1:p:105-126.
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    File URL: http://hdl.handle.net/10.1093/aler/ahaa004
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    Citations

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    Cited by:

    1. Siyu Ren & Yu Hao & Haitao Wu, 2022. "How Does Green Investment Affect Environmental Pollution? Evidence from China," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 81(1), pages 25-51, January.
    2. Alexander Henke & Fahad Khalil & Jacques Lawarree, 2022. "Honest agents in a corrupt equilibrium," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 31(3), pages 762-783, August.
    3. Krishnendu Ghosh DASTIDAR & YANO Makoto, 2020. "FCPA and Market Quality in Emerging Economies," Discussion papers 20087, Research Institute of Economy, Trade and Industry (RIETI).

    More about this item

    Keywords

    D73; K42; H57; F53;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations

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