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Firm Growth and Corruption: Empirical Evidence from Vietnam

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  • Jie Bai
  • Seema Jayachandran
  • Edmund J Malesky
  • Benjamin A Olken

Abstract

This article tests whether firm growth reduces corruption, using data from over 10,000 Vietnamese firms. We employ instrumental variables based on growth in a firm's industry in other provinces within Vietnam and in China. We find that firm growth reduces bribes as a share of revenues. We propose a mechanism for this effect whereby government officials' decisions about bribes are modulated by inter-jurisdictional competition. This mechanism also implies that growth reduces bribery more for more mobile firms; consistent with this prediction, we find a larger effect for firms with transferable rights to their land or operations in multiple provinces.

Suggested Citation

  • Jie Bai & Seema Jayachandran & Edmund J Malesky & Benjamin A Olken, 2019. "Firm Growth and Corruption: Empirical Evidence from Vietnam," The Economic Journal, Royal Economic Society, vol. 129(618), pages 651-677.
    • Handle: RePEc:oup:econjl:v:129:y:2019:i:618:p:651-677.
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