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The incidence of graft on developing-country firms


  • Gonzalez, Alvaro
  • Ernesto Lopez-Cordova, J.
  • E. Valladares, Elio


This paper measures the extent to which firms in developing countries are the target of bribes. Using new firm-level survey data from 33 African and Latin American countries, we first show that perceptions adjust slowly tofirms'experience with corrupt officials and hence are an imperfect proxy for the true incidence of graft. We then construct an experience-based index that reflects the probability that a firm will be asked for a bribe in order to complete a specified set of business transactions. On average, African firms are three times as likely to be asked for bribes as are firms in Latin America, although there is substantial variation within each region. Last, we show that graft appears to be more prevalent in countries with excessive regulation and where democracy is weak. In particular, our results suggest that the incidence of graft in Africa would fall by approximately 85 percent if countries in the region had levels of democracy and regulation similar to those that exist in Latin America.

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  • Gonzalez, Alvaro & Ernesto Lopez-Cordova, J. & E. Valladares, Elio, 2007. "The incidence of graft on developing-country firms," Policy Research Working Paper Series 4394, The World Bank.
  • Handle: RePEc:wbk:wbrwps:4394

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    Cited by:

    1. Mary Hallward-Driemeier & Gita Khun-Jush & Lant Pritchett, 2014. "Deals versus Rules: Policy Implementation Uncertainty and Why Firms Hate It," NBER Chapters,in: African Successes, Volume I: Government and Institutions, pages 215-260 National Bureau of Economic Research, Inc.
    2. Clarke, George R.G., 2011. "How Petty is Petty Corruption? Evidence from Firm Surveys in Africa," World Development, Elsevier, vol. 39(7), pages 1122-1132, July.
    3. Clarke, George R.G., 2011. "Firm Registration and Bribes: Results from a Microenterprise Survey in Africa," MPRA Paper 31857, University Library of Munich, Germany.
    4. Anos-Casero, Paloma & Udomsaph, Charles, 2009. "What drives firm productivity growth ?," Policy Research Working Paper Series 4841, The World Bank.
    5. World Bank, 2009. "The Gambia : An Assessment of the Investment Climate," World Bank Other Operational Studies 12983, The World Bank.
    6. Yan Leung Cheung & P. Raghavendra Rau & Aris Stouraitis, 2012. "How much do firms pay as bribes and what benefits do they get? Evidence from corruption cases worldwide," NBER Working Papers 17981, National Bureau of Economic Research, Inc.
    7. World Bank, 2013. "Russian Federation : National and Regional Trends in Regulatory Burden and Corruption," World Bank Other Operational Studies 16566, The World Bank.
    8. Şeker, Murat & Yang, Judy S., 2014. "Bribery solicitations and firm performance in the Latin America and Caribbean region," Journal of Comparative Economics, Elsevier, vol. 42(1), pages 246-264.

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    Public Sector Corruption&Anticorruption Measures; Corruption&Anitcorruption Law; Crime and Society; E-Business; Access to Finance;

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